Are you a contrarian? Here’s a litmus test

Huge tech companies have led the way in this record-breaking bull market. It makes sense, since technology influences nearly every other sector.

But can the momentum continue?

That’s the question I ask Chris Wood, chief investment officer at RiskHedge. Chris is a 15-year market veteran and a brilliant tech analyst. Chris offers his thoughts on where the tech sector is headed. Plus, he gives a couple of his favorite small-cap ideas to invest in right now [22:13].

Most investors think they’re contrarians… but they’re wrong. In my educational segment, I give a simple pop quiz to help you determine if you have what it takes to be a successful contrarian. Plus, I share the key metric to keep in mind when looking for the best contrarian plays… and a shopping list of names [50:49].

Inside this episode:
  • Rant: U.S.-China trade war/Singles Day [00:30]
  • Guest: Chris Wood, chief investment officer at RiskHedge [22:13]
  • Educational segment: Are you a contrarian? [50:49]
Transcript

Wall Street Unplugged | 695

Are you a contrarian? Here's a litmus test

Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on Main Street.

Frank Curzio: How’s the going out there. It’s November 13th, and I’m Frank Curzio, host of the Wall Street Unplugged Podcasts, where I break down the headlines and tell you what’s really moving these markets.

Frank Curzio: Do you guys know how bearish I’ve been on China? I know you follow the news. US and China have been in so-called trade war for close to two years now. We’ve seen millions of crazy headlines about how this trade war is going to destroy our economy. It’s going to lead to war since protectionism has led to wars in the past. It’s going to create depression where millions of Americans are going to lose jobs. How sectors like technology, consumer goods, which are basically heavily dependent on manufacturing from China, they’re going to get crushed. How China is going to become much stronger than the US because of this trade war.

Frank Curzio: Again, it’s not million. It’s tens of millions of headlines. I mean, just put trade war will kill America, right? Just put that in Google. Well, will destroy America. For me, it came up with 16 million results, right? All these stories, right? All this crazy, the ups and downs of the markets and back and forth, all this stuff, right? What it turned out to be, complete bullshit. Complete bullshit, which I told you it’d be. For two years, I’ve been telling you that. By bullshit, I mean, the trade war did not hurt America. It did not hurt our economy. It did not lead to fewer jobs or layoffs, right? We have record low unemployment. Certainly did not result in China getting the best of us, since their economic numbers are pretty much horrible. I’ll give you a quick rundown. GDP near a 30-year low, industrial output at its lowest levels in over 10 years. China’s exports to the US are down 16%. Guys, that’s a monster, monster, monster number, monster number.

Frank Curzio: China comes out with their Beige Book just like we have our Beige Book, where it’s like a survey of businesses, and it’s 3,300 businesses in China that they survey, and the latest reading was horrible. Showing that revenue, profits, output, sales volumes, job growth is going to slow from last quarter along with both domestic and international export orders. So you’re looking at all these numbers. I mean, the icing on the cake is, look at the debt levels in China, they’ve have risen tremendously, tremendously throughout this. Now, I’m not saying this to pat myself on the back here, right? You guys know I’m probably the most humble guy in this entire industry, right? I cover my loses and everything. But I was adamant telling you to ignore the trade war fears, ignore the headlines. Most people commenting, writing about this stuff, they have little understanding of the subject. They want to try to scare the hell out of you.

Frank Curzio: It’s always nice to get Trump in a headline because it’s going to get more page views because they’re like the New York Yankees. If the New York Yankees or Boston make it or Dallas Cowboys, people watch those events. If they make it into the Super Bowl or the World Series because either you love the Yankees or you hate the Yankees. You either want to watch it because you hate him, you want him to lose or you’re a fan, you want them to win. Either way, it gets the highest ratings, right? So that’s why people love Trump and the headline, which this is all about Trump because he’s basically taking on China by himself. He’s not going through Congress. This is just something that he has the ability to attack them just for himself, and that’s what he’s doing, right? He’s taking on China.

Frank Curzio: When I look at it, right, the US economy, it’s the greatest in the world. Has the biggest spenders in the world by a mile. China is a manufacturing giant. So for me, you could look at all the numbers, and numbers are evident how China’s market crash is much more than ours when we had tensions, and it goes up higher when we didn’t have tensions because it fell so low. But you could see that it influences China much, much more than it influences us, which forget about the stats people don’t like looking at, but just ask yourself a simple question, right? Let’s just use a little common sense here. Which one do you think holds more power? Is it the country with consumers that spend boatloads of money on new products, no matter who makes them, right, they just love to spend money or the country that manufactures these products. Because when I look at China, manufacturing, it can’t sell all those products they’re manufacturing, to anyone. They’re selling them to the US. We’re the biggest buyers.

Frank Curzio: But if you’re the US, you could buy these products anywhere, anywhere. Of course, listen, the US, we’re going to have to pay a slightly higher price, but countries are lined up around the block to produce for us. Not getting it from China, let’s get it from someplace else. We’ll still get them at a higher price. Yes, it’ll hurt margins a little bit. I get it. Lot of that will be passed off to the consumer or whatever. You could say economic, whatever it is. But our impact is going to be much less compared to China, where they’re sitting on all this inventory. What are you going to do? These inventory levels are inflating. You get stuck with a lot of these products. This is common sense. I just laugh when people say China is killing us in a trade war. China has to do a deal with us. They have to. They have to. I mean, look at the stats that I just read off. It’s a disaster there.

Frank Curzio: So I’ve been adamant about avoiding China for a while. Even with the positive trade talks, right? Where phase one of trade deals expect to be signed, whatever, coming weeks, coming months, early January. But you’re looking at the China market. It’s down close to 20% since the trade war started. This is around February, 2018, while the US stock market is up about 17%, including dividends, over the same timeframe. That’s pretty amazing when you think about. Imagine your entire nest egg, your retirement, all your money was in the S&P 500, just say, and you fell into a coma from February 2018 until now, right? You just woke up, and you look at your portfolio, went online. You’d be like, “Wow, this is cool. I’m doing just fine. Let me go back to sleep for another two years.” Whatever you want to do, but you’d wake up and be like, “Wow, this is really cool.”

Frank Curzio: Now, my point is, if you didn’t watch the financial media every day, if you didn’t read all the crazy headlines put out by these organizations, if you shut off all your social media accounts, which man, the world would be a better place if people did this, you’d be up a solid 17% over those two years. Your portfolio would be fine. Most important, you’d have zero stress. Zero stress since you’re not watching the news. You’re not watching this crazy headlines, the crazies on social media and the bots, and just, man, social media is just so disgusting now and the anger and how people attack. I understand the trolling and fine, but man, it is crazy. It’s crazy social media right now. It’s insane. You’d have zero stress if you just shut it off.

Frank Curzio: All this trade, well, think about all the stories, the top stories written in the Wall Street journal, Washington post, all the financial media, any way you look, CNBC, having people on, this is crazy. This is going to hurt us. It’s going to push this recession went all time highs, right? So ignore it. There’s some things that you should ignore. This is one of the things that you should ignore. If you listen to me, you’d be right. Again, I’m not patting myself on the back. There’s a point where I’m going here because I’ve bearish on China for the past two years. But did you see the numbers from Singles’ Day… that on Monday? So Singles’ Day is an annual online sales event happens once a year in China. Sort of like anti-Valentine’s day. That’s how I describe it. It’s an anti-Valentine’s day holiday, which celebrates people who are not in relationships.

Frank Curzio: Anyway, you could buy whether you’re in a relationship or not. You can buy whatever you want. But it’s held on November 11th every year, and this day was chosen since it’s November 11, 11/11/11, that’s singles, indicates Singles’ Day. So they say. So it’s like a Black Friday. Actually, not really a Black Friday. It’s more like a Cyber Monday because it’s an online holiday. This idea originated in 1993, but it wasn’t deemed a holiday where there was a massive online sales event until 2013. In 2013, sales topped a whopping $5.3 billion just on that day, $5.3 billion on that day. In 2014, sales were $9.3 billion again in one day. Okay? So $5.3 billion, 2013. 2014 was $9.3 billion.

Frank Curzio: This year, Singles’ Day generated over $12 billion in the first hour, in the first hour! Close to $40 billion in sales for the day. I mean, $38.5 billion. Again, trying to figure it out. They’re still trying to figure, but it’s close to $40 billion in one day. Put that in perspective. Cyber Monday last year they generate about $8 billion in sales. But let’s even go further. Okay? Because I did a little research here. The $40 billion is close to… $40 billion on one day. That’s more revenue than companies like Coca-Cola, McDonald’s, Goldman Sachs, Starbucks, Philip Morris, told you i did research on this, Raytheon, Visa, Nike, Oracle, Honeywell. That’s more money than what those companies make in an entire year, an entire year. That’s how crazy that number is. China does a great job promoting this, not just domestically, but internationally.

Frank Curzio: I mean, again, for Kim Kardashian doing live streaming about the new fragrances being available for sale on Tmall, which is a China online site. I know people hate Kim Kardashian. I wrote an interesting report on that because we recommended a stock in one of our newsletters that related to what they do. But these are the biggest idiots in the world, and their franchise is worth $1.7 billion. I wish I was an idiot like that. So they’re very, very smart. They’ve got into cosmetics. Kylie Jenner is now a billionaire. You look at Kim Kardashian, where she’s one of the biggest influencers on social media, biggest followings. She has a $350 million business by herself just with cosmetics. I mean, they’re very smart, their business. You could call them what you want, whatever, but they understand business, and they understand how to make money. I mean, it’s just evident, whatever. I don’t care if you hate it or not, but China’s great by signing them. They know what they’re doing.

Frank Curzio: Taylor Swift performed. Taylor Swift has probably the most… In fact, it gets the most Twitter followers than of anyone in the world, or pretty close, probably top five. If you look at US retailers, over 25% of them joined in on this. All right. We talk about Apple, Target, Macy’s, Costco, all these companies getting involved. They should. Almost every clothing company, clothing brand has gotten involved too from the US, and they’re posting deals on sites like JD.com and Alibaba, which are two of the biggest online retail sites in China. But this year, there were more than 200,000 brands, not products, brands that participated. 1 million new products being offered at discounts. Not a million products, a million new products. Over 500 million users were buying these products, which is about 100 million more compared to last year.

Frank Curzio: Now, what does this mean? Because for me, I’m always telling you people have a thesis, and they get emotions involved. People believe that the debt markets are going to destroy us and no matter what. They don’t care. They don’t look at interest rates. Even though everybody’s paying their bills on time, interest rates are low. That’s all you should care about with debt, and we’re perfectly fine right now. We’ll know when that shit storm happens. We’ll see it in credit default market. We’ll see in the bond market. Right now, everything’s safe. It doesn’t matter. You have the diehards, the perma-whatevers, that are just got to say, “Well, the debt. You’ve got to buy gold.” They’ll never change their mind. For me, what I always tried to tell you is you have to be willing to change your mind if the facts change. There’s no ego. Your money’s not looking at your ego. They don’t care who you are. Stocks don’t care who you are. There’s no personality, and I’m nothing. You got to do what’s right for yourself. You got to understand the markets.

Frank Curzio: If your thesis is “wow, I hate something”, and the reasons why you hate it change, your thesis needs to change. Don’t be one of those people that are stubborn. I know if you’re a guy, and our demographic is probably a 60-year-old man, and I can tell you I’m 47, and I try not to be like it, but I’m still going to be like. But we become stubborn. We become just set in our ways and refuse to change, which is very, very bad. Well, listen, it’s not a personal thing. It’s not an agenda. It’s not getting your emotions evolved to prove somebody else wrong. If the facts changed, change. But for me, when I look at this data, $40 billion, it’s a sign of the growing middle-class in China, which everybody knew was growing. But not everyone knew that China’s culture… I mean, this is a savings culture, right? People save. But the middle-class is growing, and these people love to spend money on discretionary stuff. Love it. Get it. It’s a changing of the times as the next generation of spenders is coming into play.

Frank Curzio: You’re looking at these numbers and how big it is. With China, I mean, the middle-class is just getting bigger and bigger. But it highlights a massive growth in online shopping in China, which is e-commerce, where in the US, e-commerce accounts for 11% of spending, and in China, it’s close to 20%. But China’s middle-class is bigger than the entire population of the US. It’s more than 400 million strong and growing. So when I see numbers like this, again, I’ve been bearish on China. Even though the trade war nonsense, I know it’s subsiding and ton of years companies have already moved the manufacturer supply chains out of China, right? It’s just too difficult for them to deal with the uncertainty. Or how many ups and downs have we seen over the past two years between China and the US in this trader’s view? Oh, things are good. Things aren’t good. Oh, we’re moving towers. We’re not moving towers. It’s up, down, up, down, up, down, and it’s crazy.

Frank Curzio: For a company’s point of view, those increase in towers could mean a difference in a 10% to 15% disruption in their supply chain. So let’s move someplace else. Of course, it’s going to be a little bit more expensive, but at least we have transparency for our investors because otherwise, every quarter, we have no idea what’s going to go on. It’s all based on what Trump wants to tweet that day. Well, you look at $40 billion in online sales. This one’s pretty close to 39. But it one day, what does this mean? Well, I talked about sentiment last week in my educational segment. A lot of positive feedback from it. What I didn’t mention is how important consumer sentiment is and how important that consumer sentiment is to economic growth. We saw this in 2008 and 2009 when most Americans stopped spending. They stopped spending. They were scared. They were nervous.

Frank Curzio: They wouldn’t take money in a bank since they no longer trusted the system. What happened, it resulted in one of the worst collapses since the depression in late 20s to 30s. That’s why the government, what did they do? The government did everything in its power to incentivize spending, putting money into the banking system, providing discounts, providing subsidies to anyone who’s looking to buy a home or a car during that period. You got a discount. You got a check in the mail for a couple thousand dollars. I think it was up to $8,000 if you bought a new home, if you bought a home. First time home buyer is… This is what they did to spread… Because the consumer sentiment is so important when it comes to the economy. If people are happy like they are now, the stock market going well, they spend money like crazy. That’s a huge indicator. It’s a huge indicator.

Frank Curzio: So China, it’s been a complete shit show, right? Not just because of the US trade war tensions, but you have the Hong Kong protests. Now, trade talks are more positive. If they can figure out Hong Kong, which would be a great thing. This is an economy that can quickly turn around because sentiment is going to boom. This is what we saw from Singles’ Day where Chinese consumers have a hell of a lot of money to spend, and man, they really, really like to spend. But these numbers blew me away, $38 and a half billion in sales a one day. The estimates were around from $30 to $32 billion that I saw. But this is just incredible.

Frank Curzio: To me, it’s a game-changing event. It highlights why China needs to do a deal with the US, where, “Hey, stop stealing our intellectual property.” It seems pretty simple. Maybe it’s not. It’s a culture. Make trade a little fair where you’re buying a little more stuff from us. This way, we lower the trade deficit because if China gets its act together, meaning, if they start reporting real numbers, if they work with their trade partners, if they’re more transparent, if they allow foreign investments, China’s going to be the largest economy in the world. It’s going to surpass the US easily in less than 10 years.

Frank Curzio: I mean, our economy in terms of GDP, listen to these numbers really quick. Our economy, US it’s $21 and a half trillion. China’s $14.2 trillion. It seems like a big gap. But when you go to third, hey, it’s a major drop off. You have Japan there at $5 trillion. They give Germany a four, the UK is at three. So it’s really the US and China here that are three, four times the size of every other market. You can see why trade and this getting along with you, it’s really important to China. But China becoming largest economy of the world, it’s inevitable. It’s going to happen. It’s just up to them on whether they want this happen over the next 10 years or the next 30. Man, close to $40 billion in sales in one day, in one day, I mean, that’s insane. That’s a hell of a lot of money for people to spend on discretionary stuff.

Frank Curzio: To me, that’s a game-changer. It shows the middle-class, hey, they’re big spenders, not savers. Spending from an economic point of view is always much better for your economy than saving, regardless of what you think. Yes, it’s smart to save money. But the more you spend, that’s how you drive economic growth. That’s clearly the case if they could figure out that problems, where this kind of buying power, it’s supposed to be a market of savers. Man, $40 billion in a day is a pretty big number. Yes, I’m becoming more optimistic on China, especially now that the trade tensions aren’t easing. Hong Kong is a big deal. Hopefully, they could figure that out. But it’s going to create a pretty big buying opportunity, and it’s something that I’m looking at and getting a little bit more positive on.

Frank Curzio: Again, guys, lesson here is, not that I want to give you a lesson in my opening, but be willing to change with the times. If the facts change, change. That number blew me away. To me, that’s a game-changer. It’s definitely a game-changer.

Frank Curzio: Now, the great interview set up for you today, the guest, I think I only interviewed one time in this podcast about four or five months ago. He’s a great analyst. Always shares some amazing ideas with me, and he did last time he was on the podcast, which why I got some really good feedback from you last time he was on. His name is Chris Wood. Chris, a 15-year mark event, specialized in technology. Writes the Project 5X newsletter for RiskHedge, has a great track record. For me, I love talking to him because we have a lot in common, always looking for under the radar, small cap ideas, disruptors for our subscribers. Chris is a brilliant analyst, great guy. He’s going to share his thoughts on the tech sector, which dominates the world. I mean, large cap tech, and mostly, I think you know this, but the top five companies in the world are technology companies based on market cap. It wasn’t always like that.

Frank Curzio: Oil companies, telecom companies, banks, whatever. Now, it’s technology. So he’s going to talk about getting this momentum continue. Are they going to get broken up? There’s a lot more risk now, especially on a political front. Chris is going to tell us, share his thoughts on that. Also, he’s going to share, not one, but two of his favorite small cap ideas with us, which I’m sure most of you never heard these ideas. They’re new. They’re under the radar. They’re companies that you’re not going to find the financial media, financial blogs, are really two good companies I think they’re going to be disruptors. Small cap companies. One has a $45 million mark cap. The other one I think has less than a $200 million mark cap. Again, two great names you’re going to hear about. It’s a great interview coming up.

Frank Curzio: In my educational segment, I’m going to break down how to be a contrarian investor. I know that sounds incredibly boring. But believe me, it’s going to be one of the most entertaining segments because so many people that I talk to and so many emails I get, they really truly believe they’re contrarians, and they’re not even close. They’re not even close. You’re going to be surprised to know that, hey, what you’re doing right now, you think you’re contrarian, it’s not contrarian. It’s actually the opposite. You’re on the side that everyone else is on. But understand this concept, how to be a true contrarian. It’s going to help you generate huge returns in your portfolio. I’m going to show you how to do that.

Frank Curzio: It’s a quick tease here because in this segment, I’m going to talk about at least 10 different stocks, probably more like 15 to 17 different stocks in this segment that could be huge buying opportunities. Guys, be sure to get your pen and paper ready and going to be an awesome segment. But first, let’s get to my interview with top tech analyst, Chris Wood. Chris Wood, thanks so much for joining us again on Wall Street Unplugged.

Chris Wood: Frank, thanks for having me.

Frank Curzio: Well, so I love having you on, right? Because you follow technology, disruptors, and tech has been the best performing sector it seems like forever, at least over the past five years you could say since the credit crisis where it’s like a changing of the guard, right? I mean, you’ve been falling this market for a long time. We had oil companies, some of the biggest companies and telecom companies. Now, the top five largest market cap companies in America, Apple, Amazon, Microsoft, Google, Facebook. Can this continue? Are these companies going to continue to grow? We have a lot of risk out there in terms of regulation, political risk, trying to break these guys up, which would probably make them even stronger, which usually happens when you break them up. But I wanted to get your take because these companies continue to do well that even though you have doubts with so many of them. Do you think this trend is going to continue with technology?

Chris Wood: Yeah, that’s interesting. I mean, it’s crazy, right? Microsoft and Apple are both above $1 trillion market cap now. Didn’t see that coming 10 years ago maybe. But yeah. Honestly, I think it can continue. I don’t think the government should be in the business of breaking companies apart. I think we’re going to see that a little bit going forward. But at the same time, these companies are transforming themselves in a lot of different ways, right? Microsoft, now the most valuable company in the world. Again, actually, I think second to Apple. But back in the day, they were pure software operating system. Then they made some bad moves into hardware. It didn’t pay off so well. Now, they’ve changed their strategy again, and they’ve gone all in on AI and cloud computing, and that’s paying off for them big time.

Chris Wood: So I mean, I think as long as they can stay nimble and continue to innovate, then yeah, things can continue to grow going forward. We can see lots of growth. I mean, we’re not going to see… I don’t think we’ll see a $2 trillion company anytime soon. But I mean, Google is continuing to innovate too. It’s interesting though because, I mean, it stinks for retail investors in some way because you have a cool opportunity like artificial intelligence, and there are these great startups that are doing all kinds of cool stuff. But then before they go public, Google, IBM, Facebook, Amazon, Netflix, scoop them up. So it’s great for those companies, and it’s great for the Googles of the world and everything. But not so great for retail investors, I mean, that we’ve got what, half as many publicly traded stocks today as we did 20 years ago. That’s another reason why I think that we can see things continue to grow too because where else is the money going to go? Right?

Chris Wood: So yeah. I mean, overall, I think this trend in tech can continue. It’s kind of creepy sometimes about how much information some of these companies have about you. But apparently, nobody really cares. Barring some really, really big regulation side issues. I mean, I see these things continue to go forward.

Frank Curzio: It’s a good segue into my next question because what you specialize in is you find disruptors within technology space and different areas, which is not that easy to do in this area, right? I mean, other areas you could find something in biotech and invest early, where you’re not going to see Pfizer take these guys over until they have phase one test results that look pretty good and phase two where you can invest in these companies early on when now… I mean, Uber’s a great company, yes, is down tremendously, and it shouldn’t have been trading at a $70 billion valuation, but it’s still a $40 billion, $45 billion valuation. It would be nice if investors could invest in this thing at $1 billion valuation, $2 billion valuation. But all these companies, it’s either like the AI-focused ones that had the best technology getting bought in the private market, or these guys are like, “Hey, we’re going to do it on our own.” And they get investments from these big guys, but it’s all been done in a private market, and the time it hits the retail market, we’re kind of like the suckers, right?

Frank Curzio: This is where we dump everything on you, which they were actually going to sell that to us, right? Which is amazing. But you see all these things coming out of crazy valuations, where you can’t buy them early stage in their growth. So how do you find disruptors in this industry?

Chris Wood: Yeah. So I mean, like you said, I’m basically looking for the next Netflix, Amazon, Google type disruptors before they made a big splash and before everyone else has heard this story. I call my initial screen to look for these early stage disruptors, The CHAOS Formula, because that’s what these companies really thrive on. So this is a five-point checklist to filter out what I think really has a chance to produce big gains in short order from what really doesn’t.

Chris Wood: So CHAOS is an acronym. It evaluates a stock based on five criteria, change, hype, acceleration, ownership, and size.

Chris Wood: So change is really the foundation of chaos and disruption. These small companies first onto the scene change things in a big way. They can be doing it under the radar for a good bit of time actually before Wall Street catches on.

Chris Wood: The hype part is basically looking for trends that are being hyped, right? Like artificial intelligence, 5G and then finding companies that nobody’s heard about yet that are going to enable or benefit from these trends. Right?

Chris Wood: Acceleration is about the potential for exponential growth, really. 30% growth year over year is good, but 100%-plus growth is that you really see big gains in short order.

Chris Wood: Ownership looks at just that, right? It makes sense to go after companies whose founders and management and board members own a lot of the stock because they have the same interest as you do. You also want to follow great investors. I mean, you mentioned the biotech thing, and I do invest in biotech also. There, you’ve got the Baker Brothers who have a long history of making big money in that tough space. So if you’re looking at a biotech stock, that checks all your boxes, and the Baker Brothers have just invested in it too. That helps reinforce your thesis.

Chris Wood: Then when it comes to size, and I think it makes sense to go after obviously small companies that are going to shake things up in large markets because that’s the easiest way to grow fast in short order, right? It’s a lot harder for $100 billion market cap company to grow into a $1 trillion market cap company than it is for $100 million market cap company to grow into a $1 billion market cap company. But then you can look at other things too, right? All these big tech companies, they still need things, right? There’s a lot of components that go into an iPhone, for example. So another thing I like to look at is picks-and-shovels investments. The term comes from California Gold Rush, as you might recall. Thousands of folks rushed out West to make a fortune. Few found gold, most just found dirt. But the entrepreneurs selling the mining equipment, the picks and shovels got rich.

Chris Wood: So today, a picks-and-shovels company is one that provides products or services that allow an industry or trend to thrive or one of these big companies. Last time I was on, I talked about an RF filter manufacturer for 5G, which the filters go on every single smartphone. Cisco routers and switchers, for example, were the picks and shovels of the internet really. So you can really win big in those areas. It’s kind of actually a good segue into this really cool company that I’ve been looking at. It’s a picks-and-shovels play. I use the chaos formula to get to it. So basically, back in 2012, Google Glass was supposed to be the next big thing. I’m sure you remember these things. They were shaped like a pair of glasses without lenses, and they had a minicomputer in the upper right corner in what would have been the right lens in glasses, what we call an augmented reality headset, or an AR headset for short. AR headsets overlay digital information onto what you see in the real world.

Chris Wood: So I’m sure you’ve seen examples of this in the movie when a fighter pilot locks onto an enemy jet or when Tony Stark’s Iron Man helmet overlays information onto his field of view. Now, Google released the Glass in February of 2013 to a lot of hype. You can probably recall. It was featured in Time Magazine, endorsed by celebrities, and touted as really the future of smart devices. Business Insider even predicted that by 2018, Google Glass would sell 21 million units a year. There was…

Chris Wood: Yeah. There was a total flop. I mean, I’m sure you remember people who wore Glass as being derided as glassholes right? So Google ended up pulling Glass from the consumer market in 2015. Now, it failed for a few reasons, of course. It’s outward-facing cameras creeped people out because you couldn’t tell when someone was recording you. But more importantly, it didn’t solve a real problem. Google couldn’t even find truly compelling uses for it. But then a few years ago, Google noticed giant companies like Boeing starting to ask questions about Glass. So Google developed a lighter more versatile AR headset for business or industrial purposes called Google Glass Enterprise Edition. It’s a little mini-computer, can be removed and attached to safety glasses, goggles, or the inside of a helmet. It’s also got a light, so lets people know if you’re taking photos or recording video. So it takes away the creepy factor.

Chris Wood: But the point is that lots of big companies are interested in this new Google Glass for a simple reason. It improves productivity, efficiency, and safety, right? So for example, workers at a Boeing factory use Glass to assemble these complex wire harnesses, thousands and thousands of wires. It’s really, really complicated stuff. They used to have to go through an instruction manual on paper or a laptop or tablet or whatever. But using Glass, they can call up the schematics and use voice controls to navigate the instructions. Boeing says that this has really almost eliminated error rates and boosted productivity by 25%. In jobs that require physical tasks, the advantages of using AR headsets are almost limitless, really. Imagine the repairman fixing a power line. An AR headset allows him to call up instructions without having to juggle a manual or papers. That allows them to answer and talk on his phone without fumbling around. Using his camera, he can share a live feed of what he sees with a colleague. Everything he needs is available in his field of view, so he can focus on the job at hand.

Chris Wood: Lots of companies are finally catching onto this. Technicians at Kelson Group elevator use AR headsets while repairing elevators at One World Trade Center in New York. They’ve cut repair times by more than 60%. Technicians at an Airbus factory in France use these headsets to position cabin seats and all the furnishings down to the millimeter. They’ve eliminated errors and boosted productivity by 500%. So we’re just at the beginning of what I think is going to be really, really big trend going forward. AR headsets are going to improve productivity for millions of companies. They make workers better, faster, smarter, and it’s really a technology that companies can’t afford to ignore. Right now, actually, we’re at right an inflection point for business or industrial AR. I’ve actually been watching this space for years.

Chris Wood: Until recently, companies were only committing to small pilot programs. But now, they’re really starting to scale up and make big production orders. For example, DHL supply chain started testing AR headsets in 2015, and then they recently announced that they’re going to use them in 350 North American facilities as part of a $300 million tech upgrade. Market intelligence firm IDC expects exponential growth in AR spending going forward, is expecting, I think $120 billion in sales by 2022 which would be a 1400% increase in just four years. Then from the supplier side too, they see this growth also. One major supplier I talked to expects 1.3 million AR headsets to be shipped annually by 2022. That would be a 2200% increase in just four years. So basically, all the evidence suggests we’re finally on the brink of an explosion in industrial AR.

Chris Wood: Now, there are a lot of different headsets out there, right? So Google has got one. Obviously, RealWear, Heuristics, Vuzix, and Toshiba. They all sell their own headsets. But what’s cool, it doesn’t matter for investors which of these companies wins out because all these headsets use technology from one company. The company is called Kopin. It’s a $40 million market cap company that supplies a micro-display technology for basically 80% of the business AR headsets on the market. So the micro-display is the tiny computer screen I mentioned earlier. All AR headsets have one and Kopin provides most of the micro-displays which I can… These microdisplays I equate to the picks and shovels to the business AR headset market. So I think there’s a huge opportunity here to get positioned early in this business AR trend with a company that’s going to ride the growth to the moon. The stock is crazy cheap right now. It’s probably at least a two-bagger over the next year and potentially much, much bigger gains than that going forward, I think.

Frank Curzio: Yeah. It’s symbol is KOPN, with Kopin. But I was actually looking at it as well. I know that they have a lot of cash actually. I mean, it’s a $42 million market cap company around, but they have like $25 million in cash. So it is interesting. It is interesting. This is a company that could benefit tremendously. I’m going to ask you to share more ideas in a second, which I know my readers always love, my listeners always love. But I wanted to go back to something that you said earlier, where you were talking about 5G, right, and saying, “You look at 5G and you look at companies.” Because a lot of people, I think when they look at disruptors, they look at individual companies, which is a bottom-up thesis. You look at that specific company no matter what. But you have an economic background, right?

Frank Curzio: So I mean, do you look and say, “Hey, you know what, you just cited a whole bunch of numbers for augmented reality.” Which you’re like, “Okay. Who’s going to benefit?” It’s almost like a top-down approach, which you really don’t hear when people are investing in disruptors, is usually more company-specific, where you may look at augmented reality, 5G, or even AI and then work your way down. I thought that was interesting. But does the economic background help with that? Because it sounds like you’re looking at the industry, the numbers, and then you’re actually looking at the stocks instead of finding maybe individual picks or maybe you use both styles of investing.

Chris Wood: Yeah. Actually, I do both. Yeah. The economic background helps with that. But also, economics is about human behavior, and I’m trying to find also… The numbers are crucially important to back up your thesis and everything. But also, what’s really important is a story that investors will catch onto because if they’re going to catch onto it, that’s the stock that they’re going to buy, right? So yeah. So that’s where the economics helps as well. I mean, a lot of people talk about numbers in economics. But I was more of the option economics school of thought, where it’s micro-base, and it’s a lot about human action really. So you find these really cool stories, and then you use your top-down and bottom-up approach. I don’t like to pigeonhole myself in any particular way. Maybe I don’t know if that’s inefficient or not. But-

Frank Curzio: No. That’s great.

Frank Curzio: No, that’s great. Yeah. I mean, even for my research, it’s anything and everything, right? It’s never one style of investing because if it was one style, the whole world would use it. So yeah. So yeah, I agree with you. Yep. So let’s go into to anymore ideas that you shared because last time we got some really good feedback because you did provide some ideas, under the radar ideas. But anything else that you’re looking for, maybe in a different industry or something that you see that that’s exciting. Yeah.

Chris Wood: Yeah, Frank. So another company I’m really high on right now is in the cancer immunotherapy space. So for decades, doctors have basically relied on surgery, radiation, and chemotherapy to treat cancer. In other words, you’re talking about cutting, burning, and poisoning patients, right? These treatments, whatever, kill cancer cells, but they kill healthy cells too. The side effects are often as bad as the cancer itself. Immunotherapy is completely different. The treatment itself doesn’t attack the cancer. Instead, it directs the immune system to do it. So basically, it works like this, right? In healthy people, immune system does a great job of fighting off infections. Every day we’re bombarded by bacteria, viruses, microorganisms that attack us, attack our bodies. But healthy immune systems usually kill these invaders before we get sick.

Chris Wood: Cancer immunotherapy really builds on this idea. It trains the patient’s immune system to recognize cancer cells, then nature does the rest. So left alone, our immune systems will kill some cancer cells. But as the cancer grows and spreads, the immune system basically becomes less and less effective. There’s this great doctor from MD Anderson Cancer Center, Padmanee Sharma. She says that cancer cells evolve, get smarter, and basically learn to hide from the immune system. The cancer tricks the patient’s body into ignoring it. She says that with cancer immunotherapy, we can reset the immune response and get things going again. Now, it’s important to know that there are, you’ve probably heard this term a bunch because there are several different types of cancer immunotherapy out there. But basically, they all try to boost or restore the immune system to fight the cancer.

Chris Wood: The best powerful approaches today appear to be T-cell therapies. T-cells are like the body’s special ops soldiers. They hunt down, lock onto, and destroy specific targets. With T-cell therapies, doctors basically remove the T-cells from the patient, teach them to spot cancer better, then put them back in the patient. The process essentially reveals a red target on cancer cells, making it easier for the immune system to do its job naturally. This red target, it’s called an antigen. It’s like a signpost telling the immune system the cell doesn’t belong to the body. The antigen-specific protein, without getting too technical, it’s a specific protein that’s over-expressed on cancer cells. That means that it shows up on a lot of cancer cells but rarely on healthy cells. So because of this, T-cell therapies can help the body kill cancer cells without killing healthy cells. That’s obviously a really good thing.

Chris Wood: The science, of course, is really complex. But the idea is really simple, right? Instead of using a drug to kill cancer, doctors just supercharge your own immune system to do the job. There’s a ton of hype around these T-cell therapies today, and that’s because they generate a lot of what are called complete responses in clinical trials. This means that patients basically show no sign of cancer after the treatment is over. But there are a lot of problems with T-cell therapies that are currently in development and on the market. The first problem is targeting. Today’s T-cell therapies only target one antigen. So this is a really big problem because cancers are complex. They express lots of different antigens. So any treatment that only targets one antigen will miss a lot of the cancer cells, and that means the cancer will probably come back, and it won’t be cured.

Chris Wood: Second problem is called durability, really. Durability refers to how long a cancer therapy works before the cancer starts to get worse again. So, even though T-cell therapies generate a lot of complete responses, these complete responses don’t necessarily last, and the cancer eventually returns. Well, I mean, so after T-cell therapy, there was a particular trial I read about. 90% of patients with a certain type of blood and bone marrow cancer had a complete response, but the cancer returned in most of these patients within five years. So that’s not good obviously. Only about 20% of the patients who were originally cancer-free after the T-cell therapy were still cancer-free five years later. The third problem is side effects. T-cell therapies have a lot of severe side effects. The big one is called cytokine release syndrome. It can be fatal. It’s killed several T-cell therapy patients in clinical trials already.

Chris Wood: Another one is damage to the brain, neurotoxicity and other parts of the immune system… to the nervous system, can cause headaches, memory loss, seizures, life-threatening brain swelling. Finally, there’s the problem of cost. These things are really expensive. They’re complex and expensive to make. It costs anywhere from $75,000 to $125,000 just to manufacturer a single dose. That translates into high prices for insurance companies, Medicare patients. The two T-cell therapies on the market today cost $373,000 and $475,000 for a one-time infusion. But there’s this really cool company that’s been operating in stealth mode under the radar at Baylor College of Medicine called Marker Therapeutics. They’ve created a new type of T-cell therapy that potentially solves all of these problems. Markers Technology, it completely changed the game in cancer therapy, which is a $120 billion global market.

Chris Wood: So the clinical data has shown that this therapy can target up to 11 different antigens at once. So it’s like having 11 different cancer treatments all in one. It’s potentially much more durable, safer, and only one-tenth the cost of other T-cell therapies. So it’s easy to understand why I like this company so much. It’s still really early stage. I mean, of course, it’s not gonna generate revenue for years. But there are a lot of… With biotech, there are value inflection points along the way with the release of clinical trial data. So it’s $190 million market cap company with a multi-billion dollar potential right now. So yeah. That’s the second one. That’s another one that I’m just really high on right now, and it’s priced. Yeah. It’s really cheap right now.

Frank Curzio: No. I appreciate the research and digging in because a lot of times when I have people on here, they give you the stock and maybe a paragraph or two, but just really go in and you could see how you do the homework. The symbol for Marker Therapeutics is MRKR. No, and really great stuff. I mean, we covered a lot. But I wanted to get to this topic, which is probably the most important is before your investing career, you played running back for the University of Texas, which I’m pretty sure they were in the Cotton Bowl, right, that year.

Chris Wood: Yeah.

Frank Curzio: So I was gonna ask you, people will say it’s been a tough year for Texas. But when you look at Texas and I follow college football, that they only lost to LSU early on in September by a touchdown, right? LSU just beat Alabama. They also lost to Oklahoma, and maybe TCU is a little bit of bad beat. But what are your thoughts on that program because people are anxious to see if it’s going to turn around. Man, when it comes to football in Texas, I think everybody knows how important.

Chris Wood: Yeah. I mean, it looked like at the end of last year, I remember what Ehlinger the quarterback said, “We’re back.” It looked like they were going to be back in the mix of… I guess when I was playing, we ended up I think 14th or 15th in the country. Ricky Williams was the running back that year for us, and I was one of his backups. He was terrific. But thankfully, I’m from Louisiana also. So I’ve been following LSU. So when Texas is bad, I can just hang my hat on LSU. But yeah, no. I think Texas is… They’re still in the top 25, I think, but just barely maybe. But yeah. It’s a proud program, and they’re going to do whatever it takes to get back into the mix sooner rather than later, I think.

Frank Curzio: Yeah, definitely. All right. So we’ll end it there. Listen, I appreciate the ideas and if someone wants to learn more about you. How could they do that, Chris?

Chris Wood: Yeah. So I’m the chief investment officer at RiskHedge, a disruption-focused research firm. So it’s just riskhedge.com. So that would be just a great way to get acquainted with our stuff and read through the past issues of that letter. If there’s anything you want to move from there, there’s all the information on the website to to do that.

Frank Curzio: All right, that’s perfect. Chris, thanks so much for coming on. Again, I really get a lot of positive feedback, which I’m going to start sending to you because people love the ideas. They love tech. They love getting into disruptive companies, which is definitely a forte. So I really appreciate you coming on, buddy.

Chris Wood: Well, Frank, I appreciate you having me. It’s always a pleasure, my man.

Frank Curzio: All right, thanks.

Frank Curzio: Hey, guys. Great stuff from Chris. Always love his ideas, his take on tech. As you could see, he does a ton of research on these names, right? A lot of times we’ll have people on here, they’ll just go into, “Hey, I like this stock right now.” Maybe give you a reason, maybe a bullet or two. But I love the fact that he went through the reason why even immunotherapy. Here’s four things when it comes to T-cell technology, and I’m very familiar with this industry as you know. I’ve been talking about it four or five years, probably more like six, seven years, really early to this trend. But he talks about the risks and T-cells and how this is a company that addresses those risks. That’s important because, for me, my question would have been like, “Listen, I’ve been investing in these things. A lot of them that made money. A lot of them sold off.” Why now? He did a good job explaining why now, why this company addresses that.

Frank Curzio: Also, augmented realities is a trend that I’ve talked about probably four or five years. This is merging virtual reality with the real world. I’ve been going to Consumer Electronics Show every year for I think it’s eight years now, and I’m going this year as well. The last four, I’ve seen huge developments in this technology, where he’s right. On the industrial side, people are using these. Put the glasses on and someone could coach you from London, and you could be on a ship in the middle of nowhere on where these big floating platforms, oil platforms. If anything goes wrong they’re able to walk you through it and show pictures, and it’s kind of amazing. I sampled this technology, and I know about Google Glass and how they canceled that, but that’s an interesting play.

Frank Curzio: This is a trend that’s going to happen. Just a matter of when. I thought it would happen a little bit earlier. I mean, virtual reality is out there. But this augmented reality is like putting regular glasses on. You could play pool, and it’ll show you the exact angle through these glasses where you could never miss a shot. That’s how insane it is. It’s incredible. I mean, you could put them on and you can get directions and just like, you have the GPS system, and most cars come equipped with that now. Now, you have all that in your glasses. You could talk to someone and say, “Okay, I’m going to talk to this person.” It’ll give you a whole thing, a whole platform. Look them up on Google, and you know everything about this person before you even talk to them. This is pretty cool technology. But it is a little far out. Now that you’re seeing Google get back into this all in and a lot of other companies, hey, it’s a good trend, but I like that he covered all this stuff is really cool.

Frank Curzio: So yeah, I thought it was cool. I always say this podcast about you, not about me. So let me know what you thought that interview at frank@curzioresearch.com. That’s frank@curzioresearch.com. Now, let’s get some educational segment.

Frank Curzio: Wanted to get into sentiment again but from a different angle because this is something that helps you become a better contrarian investor. Because I covered sentiment, and this was in my educational segment, last week’s podcast. This is different because when it comes to being a contrarian investor, most people are not. They think they are, but they’re not. I’m not putting anyone down. It’s a fact. Because you think you’re on an island all by yourself, which is a term I use a lot, and again, you’re really not. It’s like calling for a market crash. You calling for a market crash, well, I mean, maybe now because a lot of people are bullish when technical indicators are higher and wet highs, but everybody’s calling for a crash.

Frank Curzio: I mean, you could just look it up. Everybody that’s typical people, they’re all “Crash. The market is going to crash. It’s all overvalued. We have too much debt. These companies are buying back stocks. You always keep earnings up.” I can keep going and going. Trade war fears, no international growth, emerging markets are… I keep going and going here. Okay. But if you’re calling for a crash, you’re not a contrarian. I hear that from tons of people. If you’re buying uranium, you’re not a contrarian. It’s out of favor, yeah, based on price. But I know hundreds of analysts, executives, money managers that are super bullish on uranium and have been for the last three, four, five years. It’s not a contrarian play. It really isn’t. Yes, it’s depressed, depressed. But if you talk to people, especially with the conferences that I go to, they’re all bullish on uranium. You want to be a contrarian. You go up on stage and say short uranium, that’s a contrarian. Nobody’s shorting uranium at this level. Where is it? $23, $24 uranium prices, put in perspective with what? $130 pre-Fukushima.

Frank Curzio: Want to be a contrarian, buy department store retailers right now. That’s a contrarian move, right? Into the holiday season, where these guys are going to try to compete with Amazon, one day shipping. These guys already hit their margins, already terrible. You really think they’re going to do good through the holiday season? Want to be a contrarian, short gold. That’s a contrarian play. Does anybody tell you to short gold? No. Everybody’s bullish on gold. You’d think buying gold is being contrarian investor. You don’t believe in the market, and you don’t want to see the stocks go higher, and you think that’s going to influence gold or whatever, inflation, whatever you’re looking for, but short gold here, that’s contrarian. Who’s telling you to short gold? I don’t know anyone saying short gold. I know hundreds and hundreds of analysts that are telling you to buy gold here. They say, “It’s going to $5,000, $10,000.”

Frank Curzio: I had the same story for pretty much the past seven years. They did dead wrong. “Gold’s going higher. It’s going higher. You’ve got to buy it. Yes, to destroy the currencies, everything.” It’s just funny when you listen to them. Again, when it comes to debt and all this nonsense, it’s not real interest rates that drive gold. It’s the stock market, guys. It’s the stock market. If stocks are going higher, Gold’s going lower. It’s that simple. It’s that simple. Trust me. I’ve done all the research. I’ve looked at deflation every trends, inflation every trends. Negative real interest rates. Does that drive gold? No. You had negative real interest rates for how long? 2014, ’15, ’16. Where did gold go? It was depressed.

Frank Curzio: It’s a hedge against what? I mean, you let me know. We’re inflating these currencies, I mean, constantly print money. That’s not the driver of gold. It’s just not. I mean, it’s a stock market. People fear the… That’s why when you look at the trade talks, when they go negative, gold surges, when they go positive, gold crashes. There’s nothing to do with inflation. There’s nothing to do with deflation. There’s nothing to do with real negative interest rates. I just love because I just heard people have been in this industry for 30 years tell me these stories, and they’re not looking at the right data. They’re just not. But it’s not easy to be a contrarian. It’s not easy going and saying, “I want to short gold.” Good luck, or short uranium.

Frank Curzio: But the best way to be a contrarian investor or flying contrarian investments is by looking at the short interest in stocks, which is available for free. Just do a Google search, come up with different sites. But the most heavily shorted stocks are the ones the smart money is betting against, the institutions, people who can go short. These companies are usually depressed. They have tons of negative press you’ll find on them, which was probably released by the firms shorting the stock, which is perfectly legal. You could say, “Hey, I’m going to tell you tomorrow what stock’s going to go to zero.” You could load up as much as you want, and you could tell everyone that stock and sell it five minutes after that report goes out and generate 20% returns and get out of it as long as you disclose everything in that disclaimer, you’re fine. That’s the market we live in. Can’t do anything about it. That’s legal for some reason. I don’t know why.

Frank Curzio: You could find a lot of these stocks. You find on different lists. Want to know some of them? Netflix, right? Competitors, Disney+, got their lunch eaten by everybody. GameStop, Bed Bath & Beyond. McDermott has been a real dog. US Steel, Rite Aid, Papa John’s, with the founder and all that stuff, Range Resources. You can put a lot of energy names on that list. Tanger Factory Outlet, Alibaba, even though they were the biggest beneficiary of all that spending on Singles’ Day one of the most heavily shorted stocks. Uber makes sense, just to lock up period. Everyone’s looking to sell that stock. Wayfair, Domino’s. Buying these companies, those are contrarian plays. That’s a contrarian investment.

Frank Curzio: Now, I don’t want you to buy these companies blindly because I just named them. I’m not talking about that. But what you want to do is find out why the smart money hates these names, and it’s real easy to find. Again, using Google, just type in, why Tanger Outlet is going to crash. You’re going to find a ton of short reports on it, short thesis, articles from wherever, if it’s Forbes whatever. So many different sites. Yeah. Yahoo Finance will be on, and maybe even the Wall Street Journal write about it. You could put that just. Change Tanger with any other stock, GameStop, Bed Bath & Beyond. Then break it down.

Frank Curzio: So the reasons that these investors are short. Do they still exist like IBM? When it was $200, everybody was talking about revenue decline. $180 revenue decline, $160 revenue declines, quarter, after quarter, after quarter. Talking about competition, slow-growing businesses that were still big overall portion of their revenue. I get it. At $161, I got it. The stock fell to $116, and you know what? IBM was aware of every one of these risks, every one of them. So what did they do? They started investing heavily over the past six, seven years, which has finally come into fruition now in hybrid cloud where they took over Red Hat, game-changing acquisition, big data analytics, AI. I mean, this is a company where, hey, it’s not this old legacy server forms, all this crap anymore, which are very, very expensive and low margin businesses.

Frank Curzio: So while revenue is declining, profits are surging because they’re getting into higher margin businesses, more services. So for me, looking at that, we are able to buy at $116. It’s now $135, and I could tell you, IBM is still a hated name. Owning IBM is still a contrarian play. But you want to look at the balance sheets of some of these names, especially when they have small caps. So these companies will have a lot of cash on the balance sheet. They may not really be leveraged. Some of them are. You have to be careful and look at their debt schedule payments and things like that. But they’ll have a lot of cash on the balance sheets, where the stock price has fallen pretty close to their net cash. You see this a lot in biotech. I’ve talked about this a lot of times. After FDA rejects a certain drug in phase one, phase two, phase three, goodbye. That stock’s gone. 40%, 50% one day.

Frank Curzio: Well, the stock will fall near cash, and you could buy that, and you’re getting the rest of the pipeline of drugs for free. If you analyze the data, it’s the FDA, where they’re not saying, “Hey, this was terrible, and get rid of this drug.” It’s horrible. But they may say, “Hey, you know what? We didn’t like the safety. We want to see a little bit more of a better safety profile, efficacy, want to see extend that life.” Whatever it is that can result in higher doses. So they go back and retest it. If everything works out, like with the case of Biogen, you’ll see this stock, which, in March, it fell 20%, 25%, and then it regained and recuperated a lot of those gains because they came back with positive results for that Alzheimer’s drug. But your job as analysts is to figure out if these risks will subside in months or the years ahead. Because if they do, these names are going to surge. They’ll pop 30% in one day on strong earnings or any sign that that businesses turning around. And it’s not just a small cap thing.

Frank Curzio: I mean, you look at all large caps. They will have major problems. McDonald’s had huge problems. Well, they addressed them announced all day breakfast. They came back. Nike as well was terrible for a while. Chipotle is the best example… Food poisoning, E. Coli. They figured it out. The stock fell from $750 in 2015 to $280 in late 2017. That’s how much that company got crushed. The shorts were all over it. Nobody was buying it. The contrarian play would say, “Hey, you know what? Now’s the time.” Even at $350 if you bought it. Why? Because today it’s over $750 again. You’re looking at 170% returns in less than two years on a large cap, well-known name brand. Because they figured it out. Now, getting back to the contrarian thing, how many people told you to short Tesla over the past two years?

Frank Curzio: Think about that for a minute. You go on Twitter, forget it. I mean, if a Tesla bumps into another car, it’s like the biggest thing in the world. Their self-driving didn’t work, and you can’t get parts any place and the China, get your factories down on schedule. All this, all this. I get it. You’re looking at the tax credit. It was going to disappear, which is huge because you have all this competition coming in. I get it. But when everyone’s leaning to one side, and Tesla’s a good example of this and, and to be fair, I’ve been negative on Tesla. But when you look at it and they come out with this quarter where Elon Musk does a great job of knowing what everybody hates because everybody lets him know every single day of his life up through Twitter, and he’s able to address that. Listen, we need costs to come down. We need production numbers to go higher. We need to establish where we don’t need cash over the next two to three years.

Frank Curzio: Last quarter, they pretty much addressed a lot of those issues, and this is stock soared. It’s trading 10% off its 52-week high Tesla. You would never know that. How many people have told you? I mean, hundreds of people on Twitter bashing it, and I get it. But it’s a sentiment thing when everyone’s on one side. How many people do you know were saying to buy Tesla? Very, very few. If you did, you were like an outcast. “This guy’s an idiot. He doesn’t know anything. What is he talking about?” Yet that idiot made a lot of money because it was a contrarian play. How many people told you that Intel was a piece of garbage. They didn’t tell you. They certainly told me because we recommended it, and we’re doing very well. I think I recommended mid-$40s. Actually, I’ve been telling you to buy this thing since $30s.

Frank Curzio: Great company, low multiple. Now, people are starting to like it because it’s near 20-year high. What about Tiffany, one of the most heavily shorted stocks this year? Just got to take over bid from Louis Vuitton for $14.5 billion. That deal’s probably going to go down closer to $16 billion to get that done. It’s already trading above that level. But Tiffany’s trading close to its all-time high, all-time high. We talked about a stock that went public in 1987 one of the most heavily shorted stocks, not all of them work. We’ve seen McDermott and GameStop get destroyed. But start looking at these names. These are contrarian plays that you should feel like. I mean, these are stocks that are completely hated, right?

Frank Curzio: They’re heavily shorted. Negative stories. Tons have been written about them. You could buy these names at dirt cheap prices because of all the negativity. In buying Tesla six months ago, people thought you’re nuts again, even Intel, even Netflix, right? Even Netflix. But that’s what a contrarian investor feels like. You should be nervous. You should feel nervous that you’re making or potentially making one of the biggest mistakes in your investment career. That’s when you know you’re a contrarian. We were like, “Whoa, man. Am I going to get this thing wrong? What’s going on?” I really felt that way about Mattel, which is doing great. Recommended Mattel. People are like, “You’re crazy. And lawsuits against…” This factored in. The stock’s done tremendously, tremendously. If you look at all their businesses, everything, Barbie, Hot Wheels, everything has turned around. International has turned around. Everything has turned around.

Frank Curzio: Now, they settled this thing, popped 20% in one day after earnings. But that’s how you find the best investments because when you’re a contrarian and you’re buying these names, and again, it’s going to feel like you’re on an island all by yourself. I know I say that term a lot. But when you’re buying a contrarian investment, it’s a hated, hated company. What does that mean? It means a lot of the risk is already factored in. It means that if a company reports in-line earnings and in-line guidance, that thing’s probably going to go up 20% because that’s extremely positive for a company where sentiment has been overly negative, opposed to buying Apple here, where everyone’s super positive. Disney here, super positive. I think you’re crazy for buying Disney here. I mean, every analyst, just positive. They’re not generating money on this thing forever. This is an act of desperation by Disney to get into this business. There’s nobody that makes money off of streaming. Nobody has.

Frank Curzio: I mean, Disney used to sit back and collect royalty fees, and that’s greatest business in the world. Sit back, get a check, go out, go on a golf course. Awesome. Now, I mean, they were receiving these checks from Hulu. Now, they own Hulu or most of it. You know what? Now, instead of getting those checks and having fun on the golf 2course and high-fiving all your friends, now you’re losing a billion and a half dollars a year. Crazy business. Just surprised so many people like it, especially when you look at Disney’s debt structure, which I covered in detail on Frankly Speaking, which is my podcast only available to subscribers. It’s really, really cool. But that’s how you be a contrarian investor.

Frank Curzio: Again, told you that segment wouldn’t be boring. A lot of people talk about contrarian, but you should literally feel like you’re on an island by yourself. Because if people share the same sentiment as you with an investment, where you’re long goal, and the market’s going to crash. There’s a lot of people out there to believe that. It’s not a contrarian play. It really isn’t. Hopefully that came across in that segment, and hopefully, I taught you a little bit. Again, a lot of these lessons come from the mistakes that I made. It’s not like I’m some kind of genius. I’ve just been doing this for a long time, and I want to share those stories with you, this way you don’t make the same mistakes and become better investors and make more money. This way, you could take your family’s out, take your kids out, take your wife out, whatever you want to do with your money, buy houses, buy cars, whatever it is. But that’s the goal here to increase our generational wealth.

Frank Curzio: So guys, thanks so much for listening. Quick note. We are launching Rich Suttmeier’s newsletter. It’s called the 2-Second Trader, is going to happen in probably about two weeks. Super excited. His system is going to be on our site. So it’s not just Rich coming out with a trade every week based on his proprietary system, which has been awesome. If you don’t think it’s awesome, go to www.curzioresearch.com absolutely for free and look at Chart of the Week and just look at his past calls, which he writes every single week. Seriously, just go, and you’ll look at five or six… He’s been dead right on almost every single one of these things. He’s been red hot. So this is his system that not only are you going to get a trade every single week, but it’s going to be a ticker box on our site where you could put any stock in your portfolio, and it’s going to give it a trading levels over whether you should buy or sell or whether you should hold.

Frank Curzio: So that’s original. I think that’s really cool. It’s going to be a great feature. We’re going to offer a great price for our listeners and subscribers. But it’s the first product that we launched in 18 months. I’m really, really excited about, and I know Rich is excited too to bring it to you. So a lot going on behind the scenes. I just want to mention that to you. If you’re on our list or you listen to this podcast, you’re going to hear a lot more about it, and please sign up through me, through this podcast, or through the offer that you’re going to receive because that’s going to be the cheapest price that you’re going to get, and that’s going to happen within probably the two weeks that we launch this thing. After that, we’re going to raise the price significantly. But I always want to offer discounts to my listeners and people who follow us for a long time. I always appreciate that. So guys, covered a lot today. That’s it for me. Thanks so much for listening. I’ll see you guys in seven days. Take care.

Announcer: The information presented on Wall Street Unplugged is the opinion of its hosts and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility.


Editor’s note: In this week’s episode, Frank talks about  2-Second Trader, Curzio Research’s soon-to-be-launched weekly trading advisory edited by Rich Suttmeier. You’ll hear a lot more about  it in coming weeks. But if you haven’t already, check out Chart of the Week—where Rich uses his proprietary trading system to tell readers when to buy or sell.

RECENT EPISODES

quant investing

How to find the best value stocks for massive, short-term returns

With the markets near all-time highs, is it a good idea to buy stocks in 2020? Meb Faber answers… and his response may surprise you, so pay attention.
Listen Now
digital securities

How tokenization is revolutionizing home ownership

Matthew Sullivan answers all your questions about his company QuantmRE, where homeowners can sell a stake in their homes to investors for loan-free cash.
Listen Now