Wall Street Unplugged
Episode: 934August 17, 2022

How I would fix Disney

Disney

We start today’s show by comparing recent earnings from Target (TGT) vs. Walmart (WMT)… what they say about how big retailers are handling inflation… and which stock has more upside from current levels.

Meme stock Bed Bath & Beyond (BBBY) has surged nearly 100% in just five trading days. We highlight what’s behind the massive move (it’s not retail investors)… and share some sobering details about the stock’s fundamentals.

Turning to 13F filings, we share where the smart money is investing right now… why these filings need to be taken with a grain of salt… and why Amazon (AMZN) stood out.

Activist investor Dan Loeb of Third Point just took a stake in Disney (DIS)… I break down why he’s facing an uphill battle… and what I would push for as an activist investor to send the stock soaring.

Finally, I’m heading to Palm Beach this weekend to attend the Crypto Connect & NFT Expo… I’d love to see you there. Here’s how to get VIP tickets.

Inside this episode:
Transcript

Wall Street Unplugged | 934

How I would fix Disney

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 it going out there? It’s August 17th. I’m Frank Curzio, host of the Wall Street Unplugged Podcast, where I break down headlines and tell you what’s really moving these markets. Daniel Creech is back, senior analyst of Curzio Research. Daniel, what was this? The seventh, eighth vacation you have this year already, or what’s going on?

Daniel Creech: Good morning, Frank. Happy Wednesday everybody. We have to clarify something quickly. There’s a difference between vacation and location. A friend of mine I was talking to and he says, “Hey, where you at?” And I said, “I’m in Ohio right now.” And he was assuming I was in Jacksonville, or here on the island. And he says, “How much time do you get off?” I said, “I’m not taking time off.” Anyway, moving on, I can’t win this, I just had to say that. It’s like, “Hey, I’m not guilty, now I plead the fifth.” No more questions.

Frank Curzio: So yesterday, I said that knowing that Daniel’s pretty much close by, and I know he heard it when I said, “He’s back from his eighth vacation.” And he just opens his door and goes, “He’s such an ass,” which is great, I think.

Daniel Creech: But no, it’s great to be back. This is what I miss most when I’m traveling, so great to be back on the podcast and got some fun things to talk about.

Frank Curzio: Yeah, let’s start really quick with Target and Walmart. I will get to meme stocks, get to 13Fs and stuff like that. Just Target and Walmart, I thought it was a big deal today because Walmart reported yesterday, unbelievable, unbelievable quarter. Their inventory levels are 25% higher than normal. And in one quarter, they erased a lot of that without actually… They did cut prices, but not significantly. As they saw demand, they were able to raise prices for some things. Just, I never saw a company that had that much inventory, which a lot of the retailers have right now. Just, I don’t want to say fix the problem, but man, holy cow. It’s looking 100 times better than the last quarter. And Walmart’s really one of the first report I read yesterday and the stock shot up. It’s only down about 12% from its highs and several highs.

Frank Curzio: And, sure enough, Target reported. And I want to see is maybe I just didn’t get… I don’t remember when inventory levels were higher. I just don’t remember companies correcting something that big, that major, being all the way to one side and being able to fix those problems, a lot of them. And then Target came out and you saw. That doesn’t happen. What Walmart did is not normal. It’s because Target’s numbers, they lowered significantly just like everybody else in a retail industry a quarter ago. And they revised again. They issued a warning a couple weeks after they reported last quarter. And now they missed estimates and said, “Look, we just had to get rid of our inventory. It was down a lot.” It caused operating margins to fall to 1.2% from close to 10% a year ago. But Target’s getting hit a little bit today, but they did reaffirm second half revenue and also operating margin guidance, which is going to be a lot, lot higher than it is now.

Frank Curzio: So basically, they just did, I won’t say a fire sale, but said, “We got to get this inventory off.” It just didn’t seem like a fire sale from Walmart when they said they were seeing demand from higher end clients who are just going to Walmart now just to save on cost because of inflation. What did you think of these two quarters?

Daniel Creech: These are great examples of how amazing business and management teams can operate in crazy environments. Yes, these are boring stocks, groceries, apparel, different types of furniture and things. But to your point, this is like reading through government figures and talking about billions and trillions of dollars. You just don’t really grasp the movement and the wherewithal that it takes to turn around huge, huge corporations like this.

Daniel Creech: And first, let me say this. These are the most boring stocks, Frank. And I don’t know if you’re going to recommend short in Target and buying Walmart or anything like that. I don’t think there’s a lot of risk, long-term. If you’re not a trader and you hold either one of these companies, the bigger point here is this shows stocks are going to separate into a stock pickers market. Management’s going to rise at the top. These are obviously the best and biggest retailers, and it shows you how inflation is hurting everybody. And when you have tougher conditions on the spending, you’re going to see Walmart get more customers. To your point, Walmart is seeing an influx of higher-end customers as well as maintaining their lower-end customers. Right now, it is hurting profits and all that. But if you’re Walmart, Frank, are you looking out three months or 15 years? You’re looking at the long-term. So, they’re going to get that back eventually with pricing power and all that kind of stuff.

Daniel Creech: I thought both quarters are really good considering the fact if you just look back a few months and weeks ago, they’re both warning and having to come out more than once to cut guidance and tell Wall Street, “Hey, we’re seeing a huge shift in consumers. They’re not buying decks anymore and staying home. They’re switching to apparel.” What was the… We were joking yesterday. The figure that Walmart cut their containers, shipping containers down-

Frank Curzio: They cut them in half, quarter over quarter, in half. And they actually came out and said, “And now, they’re more in line with the historical…”

Daniel Creech: Basically, going back to pre-COVID, almost.

Frank Curzio: At pre-COVID, maybe last five years.

Daniel Creech: Or the start of it, yeah.

Frank Curzio: Or yeah, pre-COVID. But that’s how much they had an inventory. That’s how aggressive they got because demand was pushed forward so much. And that’s why you’re seeing all disruptions of supply chains. But there’s a lot to be said here, because people might look at this and say, “Targets numbers weren’t that good, but they maintained their guidance. Walmart really got it right, so buy Walmart stock.” No. No, no, no, no, no, no. You got to go further than this because we’re talking about the stock price and where it trades. Walmart is 12% off its highs. Do you know how much Target is off their highs, Daniel? It’s 34% off of its highs.

Frank Curzio: Now, if Target does… They reaffirm their guidance, if there happened, they get a lot of inventory off and said, “Okay, this is the kitchen sink. This is gone. This is done,” if Target can just meet those estimates for the second half of the year, you’re going to get a 25% pop in this thing over the next six months. That’s how you have to look at it. Well Walmart, yes, it was great. It’s up, but it’s priced in down only 12%. It’s actually up for the year. One of the few stocks are up for the year. They’re 3 or 4%, maybe a little bit more now. But you look at where Target is in that stock price and how much it’s sold off, but you could see the difference.

Frank Curzio: And that’s the first thing. One is I would be a buyer of Target here more than Walmart. And that’s what you want to do when you compare. That’s what we’re going to get to Disney in a minute. I just don’t understand why everyone’s running into Disney when Netflix is clearly a much, much better buy here. And here’s where one of the points I’ve been trying to drive home over the past two months. It just got really bullish on the market. It’s not as bullish, obviously. We’ve gone up tremendously off the lows here. You’re going to see separation. There’s massive supply chain concerns. Some people are getting it done. Some people aren’t. Here it is. This is it with Walmart.

Frank Curzio: I mean, Target is basically down today, but losing what it gained yesterday because of Walmart figuring this stuff out. So now, they went up, they say. It goes up in sympathy. Target’s losing those gains, but you could see the difference in management teams. And then when you look under the hood a little bit more, say, “Wait a minute. If Target gets it right this quarter, and then they’re able to do good and second half and meet those estimates, this stock is obviously going to come well off of its levels that it is right now.” Compared to Walmart, expectations are a lot higher so they have to continue to do well. And if they just…

Frank Curzio: So, if both of these companies, Daniel, really quick from a stock perspective, we’ll move on. If Walmart meets these estimates next quarter, the stock’s probably going to go down. If Target meets these estimates next quarter, the stocks can go up a lot. It’s going to show the worst is behind them. That’s the difference. That’s what you want to see. So, you have high expectations for Walmart stock because it got done, and that’s why you’re seeing it move a lot, lot higher off of its lows. Target, not as much. People don’t believe that everything’s going to be okay right now. “I don’t know. The guidance will see.” But if they are able to get it right, not operating margins, go back up to 6 or 7% of whatever to extort historical donors instead of where they… Again, it was 1.2% operating margins. A year ago, they were 10% basically.

Frank Curzio: So yeah, that’s how you have to look at it. And watch the separation. You’re going to see that among retail, TJ Maxx also took a little bit of a hit down a little bit today. However, those numbers are very, very good. I think going forward, that guidance was pretty solid going forward. So, you’re going to see separation and retailers that are getting it done across all industries right now, especially due to supply chains and who’s getting it done, who’s not. And that’s going to be how you select stocks. So, get about looking at the S&P, where it goes from here. S&P’s going to be down 4% over the next four, five months, and you can see stocks up 20% from their lows if you’re picking the right ones. And that’s what we’re seeing right now in the market.

Daniel Creech: One last thing on both of these. Their comparisons are up against tough comparisons because you have this pull forward from COVID and things. So to your point, Target says in the back half of the year, they’re going to target an operating margin rate of around 6%. That’s significantly higher than this quarter as they go through the inventory. It’s down from 9.8% in 2021. But again, that was a lot of because of COVID.

Daniel Creech: This is getting out of COVID. Hell, our government here in the US, Frank, is going to stop. Did you see the headlines where they’re going to stop buying as much vaccines and things towards later this year to get past the pandemic? Well, that is just another data point to prove that even coming out of the COVID pull forward, Target is still doing and operating more. That’s massive for this kind of scale in retailer. So yeah, just I like you’re looking forward things there. I’m too boring, but just for fun, I will take Walmart from here. We can time stamp this and see who does better. I’m going to get smacked by this with Target, but let’s see.

Frank Curzio: All right, let’s see. But that’s how you have to look. We take an example of two stocks that everybody knows. Yes, they’re boring. Yes, they’re not fun. But look at the difference in what they did this quarter. It’s a big difference. They’re the comparables. That’s why you can compare at Target to Walmart. That’s what you’re going to see going forward. Now, let’s move on to a stock I told you to buy five days ago at 10, which was Bed Bath & Beyond. Did you listen to me? How crazy is the meme stock, how powerful it is? We’ll get to it a little bit, but what are your thoughts first where Bed Bath & Beyond is just that’s the number one stuff everybody’s talking about obviously, because it’s up 300% in five days.

Daniel Creech: This is just entertaining to me. Some people are going to rant about, “Hey, this is bad for markets and capitalists. It gives us a bad name.” I don’t go that far because there’s silliness in everything. I would like to know. There’s an article in the Wall Street Journal as of yesterday, Frank. Or no, it’s today. But they really don’t say anything about what’s driving it behind it. I know you have a good argument about algorithms. I know I’ve seen some headlines about the retail investors being back. No doubt what the short interest has to be, depending on what website you check, it’s 30 to 40%. I’ve seen a couple times.

Frank Curzio: I just brought up.

Daniel Creech: That’s one thing.

Frank Curzio: So, I want to thank you here. And I can show you some key parts-

Daniel Creech: Let me… I know you got a good comment. Let me just say this. Yesterday when this stock is rallying, it was up at 70% at one point, right, I think. B. Riley Securities comes out, and this isn’t throwing stones at them. This is just timing, and we joked about it. I joke about this with you. Analysts come out and said, “We’re downgrading Bed Bath & Beyond from neutral to sell and reiterate our $5 price target.” At this point, it was probably a $15 stock because it popped so much yesterday. Frank, this is based on their valuation of 0.2 times fiscal year 23 sales estimates. The stock is going up.

Daniel Creech: And again, this is just the environment that we’ve chosen to play in, to pull the Godfather line. Frank, you can be totally logical and common sense and say, “Hey, this company is burning through money.” I think they burn 200 to 300 million.

Frank Curzio: Yeah, they submit it. They’re going to have the question-

Daniel Creech: They had to tap credit lines.

Frank Curzio: Yep.

Daniel Creech: There is no argument to be made to say, “Hey, this is a value stock trading in a good valuation, and we think this is a good risk return for your money.” But that doesn’t matter in our reality. The stock was up 70%. It’s a fun trade. If you’re in it, I hope everybody makes money. But if you’re not watching this thing like crazy, the odds of you getting hammered are extremely well, Frank.

Frank Curzio: Well, here’s something I got to bring up. This is from Capital IQ, and it shows a short ratio. If you see, the red line is showing the stock and the green line is showing the short ratio. Obviously, it’s going up. But it’s interesting right at first, second week in May, it’s 20%. It was even. You could take the low. And this is in April when it comes to the short position at 15%, because right now it’s 37% short. And if you look, as the stop was getting killed, getting crushed, getting crushed, the shorts went higher and higher and higher on it. It made sense because the numbers are horrible. And then boom, look what happens. This thing absolutely takes off. It’s up tremendously. And you’re looking at even from here, it’s 27% to it’s…

Frank Curzio: If you have a 10% short ratio, that’s relatively high. It went up 10% of short ratio from 27 to 37 basically in a month. So, the short started piling on, and then you just have this massive short squeeze, which all you need is a little bit of information, which that’s all it takes. And it could be factual information. So, it sucks that it’s 25 right now. It’s up 22% today. It was $10 recently or five days ago, five trading days ago. But when I look, and you see there is Ryan Cohen, who’s a billionaire, who’s a Game Stop’s chairman, and it showed that he owned nearly 12% of the shares with Bed Bath & Beyond’s April 21st, including position in distant, out of the money call options, which were what? What were they? Daniel, you know them.

Daniel Creech: That was 60, 65, 70, or maybe even up to 80. They were a hell of a lot higher than Woodstock.

Frank Curzio: So a lot high, say, Chairman. So, what happens is you get a Reddit board that figures this out at the beginning. It might not even be Reddit who started this. I’ll get to that in a minute, because this isn’t a real tail push. This isn’t all meme stocks. This isn’t a Reddit. Yes, it’s been the most mentioned stock. It becomes the most mentioned stock on every single site right now because it’s crazy. So, it’s like they mentioned that the most five times more than any stock. Obviously, a move like this does not take place without Wall Street knows algorithms, which we’re tracking all this stuff. They’re not looking at stocks and saying, “Wow, did you see Target’s quarter? Did you see Walmart’s quarter? Look, the inside. They got new magic.” None of that shit matters.

Frank Curzio: They’re going in and out based on looking at the trading volume, who’s putting in trades, how they can make a quick one in a second, a millisecond. I feel like they could do 25,000 trades the same time you could do one, probably even quicker than that. So, you’re seeing this where the algorithms get behind this and push it even further, which is forcing this massive short squeeze. But here’s the thing, because those out of the money call options, they go out to January. And everyone say to them. “Wow. Holy cow, did you see this? Did you see it?” That news has been public since February. It’s the same options. But yet, all that came to this. How does that news get released?

Frank Curzio: Well, it gets released when you start following this stuff. So, you get the Reddit crowd. Okay, here you go. You got these guys talking about it. They’re going to always talk about the meme stocks. Now, you get the algorithms triggered. But even behind the scenes to get this news out, and nobody actually looked until today about this. “Oh my God, this guy’s got cool options of 65 or 60,” whatever they are. And again, the stock is 10, which is outrageous. You’re like, “Holy shit, what’s going to happen?” And it’s through January. So all of a sudden, everybody knew that today, when everybody could have known that in February when this guy did it.

Frank Curzio: And that’s what’s interesting to me is the push of how you’re getting news out there, which is perfectly fine. It’s just a matter of nobody knows it. And that’s why it matters. It’s public information, not insider information. But apparently, this got to the public so late, when a lot of people load up on this position early. And now, you’re seeing this thing absolutely take off. Who knows where it’s going to go? And I’m going to do this really quick, but just to see this within the stock. And not only that, you see what GameStop did, all these things. It is pretty amazing, Daniel.

Daniel Creech: Yeah. It just continues to baffle me. Like I said, you can point to this and say, “This is what is so silly about markets and you’d be right.” But again, you don’t have any gun to your head. You don’t have to play in this. You can just look at it and breeze over it. It’s not a big, “What is GameStop by the way? Is GameStop participating in all this?” No, it’s not even a percent.

Frank Curzio: Yeah. And just take a look at something else really quick. I want to look. This is the Capital summary, and I’ll just-

Daniel Creech: Hey, you don’t think that retail invest… Sorry to interrupt. It’s back to school season. You don’t think that you either young kids on Robinhood or trading or parents are happy that kids are back in school, that they’re just day trading now and pushing these meme stocks up? You don’t-

Frank Curzio: Are these college kids? Or these kids are not in college? I don’t know. I really don’t know. But I look at this name and here, when I bring this up, so this is a Capital summary for Bed Bath & Beyond. It tells you how much debt they have, the net debt. You could see this on our YouTube channel, which is absolutely for free because of Curzio Research YouTube. You’re looking at net debt of 3 billion. Just the cash position’s only 100 million. It tells you when they have to pay this debt. So, right here would be capped at least 2.5. And they tell the amount of debt that is actually due. But most of it is due in year four, year five. You’re going to see a lot with a lot of debt due after five years.

Frank Curzio: But still, the enormous amount of debt, most of it is senior debt. It’s incredible, 100. And you just seen the numbers are absolutely horrible. It’s horrible. Whereas as of the last quarter, it looked like, “Wow, this company… I’m not going to say they’re going to go bankrupt, but man, they have to do a lot.” And it makes me think like, “What are they going to do right now?” because they have to raise capital. They should be raising a shitload of capital. Do it at the market, whatever you need to do. Do it at a discount, whatever you need to do. But right now, you should do everything you can and try to raise money for this stock at this price that’s up 300%.

Frank Curzio: And AMC did that and just, you need the cash and just take advantage of it. You got it all the way up there. You got the stock all the way up, and that’s great. But just, it’s got to result in a quick stop of this momentum and the stop coming down. But who cares? Because if this stock goes back down to 10 and 9 and 8 and 7, it might. Eventually, the fundamentals matter, right? Eventually, the fundamentals matter. You could only go so far and build this thing up, but fundamentals matter. If you don’t have the fundamentals, you’re going to go out. You’re going to go under sooner or later.

Frank Curzio: And the fundamentals aren’t there. They have to raise cash. They have to close a ton of stores. You could do it through your stock right now, and that’s how you should be playing this. But look, it is what it is. Have fun with it if you want. People have thousands of dollars and say, “I don’t care if I lose this, but I wanted to turn it into 20 grand right away, and here you could do it.” So, I’m not going to say you’re an idiot for buying it here, because I probably would’ve told you an idiot for buying it three days ago.

Frank Curzio: So to be realistic, just if you’re playing around with this and the option’s just expect to lose all your money, and that’s fine. That’s a good trade for you. If you have two grand and you’re like, “You know what? I don’t care. I did well past couple weeks. If I lose those two grand, it’s fine. But I want to turn it to 20 grand.” That’s what the meme stocks are for. And some people played a crypto market for that, depending on what you’re doing. But it’s amazing to see this type of move. And guys, this type of move for this company with the amount of volume that you’re seeing is not done by the Reddit crap. It’s not done by the retail crap. They’re contributing. Yes, they’re mentioning it. But if you go to every website, every major website, even in CNBC, they’re going to say, “This is one of the top stories.” And this is being mentioned 3X more than any of the story. The stock, at least, more than any of the stock today, obviously in the past couple days.

Frank Curzio: But this isn’t driven by the Reddit crowd. You have the Reddit crowd pushing this a little bit, but this is driven by the algorithms. This is Wall Street as well that understands that if someone’s on that trade and they’re short right now, they have nothing to do. They’re getting wrecked, and that’s why you see it continue going higher and higher and higher. Who knows? It could double from here and go to 50, 55. We’ll see. But guys, just be careful. It is a great story, a lot going on. For me, the big story here is the release over the last day or two, was how these out of money call options are at 60. When that was available to the public, that information, they had that position in February. But now everyone’s like, “Holy shit. They just bought this as the last quarter, because all the 13Fs came out,” and that’s bullshit.

Frank Curzio: Anyway, let’s get to the 13Fs, something we both like to do. Daniel, what did you notice? I will say this before we start with 13Fs. When we go to 13Fs, these are all the hedge fund managers. Every one of the managers, I believe, over $100 million, they have to file all their trades. There are stocks that they buy their selves and positions every quarter. So they do it, the quarter ends, and you have another, I think it’s a two-week period right now, which is into August, to do it. So this is pre-August, three months.

Frank Curzio: If you’re looking at any sells from these guys, which I heard on CNBC and Fox Business as well, where they’re like, “Wow, these guys are really blowing out of technology companies,” that was three months ago. The low was last quarter, which was mid-June. Then, the NASDAQ is up 20% since then. They were blowing out of everything like crazy. We saw 11 out of 12 weeks, the market came down, technology was getting murdered. These guys are pulling out like crazy. So, you’re going to see a lot of sells. A lot of these companies, they’re probably getting back into or they might have got into right now. So, I wouldn’t look at these and say, “Look at what they sold for me.” I will look at what they buy. And Daniel, you made a good case also of what to look at when it comes to 13Fs, is what they’re adding to as well. But that’s more relevant right now looking at 13Fs.

Daniel Creech: I think so because the environment we’re in, we’ve had such volatility. You have this huge pullback. To your point, these guys, some of the hedge funds that you look in, more of the popular ones are more traders anyway. So, they have a lot of turnover, meaning they’re in and out of different names at a high rate. David Einhorn, who is your straight of the cross for the most poor value investor, he was added. There’s been a few new positions. But again, I don’t want to look at that right now with the environment. Increased positions. Is it Kindle? How do you pronounce it? IBM spun off, KD is the ticker symbol.

Frank Curzio: Yes.

Daniel Creech: He added to that some. He did a real good job at AAWW, which is Atlas Worldwide. They got bought out. If he was buying that, that stock was tanking. What stood out to me is Dan Loeb, and this is a good segue, but we don’t have to get to your Disney just yet Frank. But Loeb added to CVE. He went from 2 million shares to 7.2 to 8 million shares. That’s a Canadian oil and gas producer. He also added OVV. He went from 2.25 million to 6 million shares in OVV, which is a US oil and gas producer. I know oil and gas is pulling back. It’s dropped to what? Six months lows, I believe. It’s down 30% at least from its highs. I’m talking-

Frank Curzio: 90, the high.

Daniel Creech: I’m talking oil.

Frank Curzio: Nine, zero, where it was today, but it stayed below 90.

Daniel Creech: And of course, the biggest and boring and the capitalist crush that I have right now on Berkshire Hathaway, Buffett continues to add. He’s above 20% in accidental now. He added to Ally Financial, Frank, the automotive. Not just automotive, but a lot of automotive financing. They increased their stake from just under 9 million shares to 30 million.

Frank Curzio: Hmm. That’s very big, yep.

Daniel Creech: That is significant. That makes me… With autos, with supply chains easing, it’s not a new position. It’s an increased position.

Frank Curzio: And it’s Buffett.

Daniel Creech: Yeah, this is Berkshire Hathaway, yes. That is a massive amount that when you got regular analysts like me out there, “Hey.” When you see some of these guys stepping up and adding millions of shares, that’s worth making a checklist, starting to go through those more and more as time goes on, and at least following those. I know I’ve been wrong on the energy right now. I don’t think that’s a trade. I think that’s a longer term thing, but it’s interesting to me to see these guys put money, especially Loeb, into energy, as well as Berkshire Hathaway.

Frank Curzio: Yeah. I think a lot of them were exiting energy too. That’s been one of the greatest trades. One of the only things, if not the only thing, that did very, very well in the first half of the year. But we’ve seen the selloff in that. And even oil prices holding steady here… Oh, actually not holding steady. Oil prices coming down. The stocks have actually performed well, I think, over the past week. You’re seeing a nice bid under the stocks, even. Because oil price at 90, these guys still print money. At 130, it’s a joke. But at 90, there was zero. The future’s pricing in zero, what? 18 months? 24 months ago? So, someone who follows the oil industry-

Daniel Creech: And you’re comparing to two years ago and a year ago, you’re still significantly higher.

Frank Curzio: Significantly higher.

Daniel Creech: $80 is great. What was it? 70 some a year ago, and 40-ish, probably mid-40s.

Frank Curzio: And they’re making profits easily at 60 outside of the deep water drillers. That’s higher. But some of these guys can produce some wells within a certain part of the Permian. It’s about four different counties you could go at 29, $35. And it’s around… 40 is a great number on average around for everybody where you’re going to make money in Shell in the US. But at 55 $60, that’s great, at 80. It’s also 85, 90, where it is now. But again, it wasn’t 130, so these guys are still going to be printing money and doing very, very, very well, which just, they’re not going to explode like they did last quarter with those numbers. So, they might be down quarter over a quarter, but still up year-over-year.

Frank Curzio: Now, some of the things that I realized. One, I want to say this to you. I want to say this to you, that you made a good point with Berkshire Hathaway. And the reason why everyone knows, you don’t know who’s adding really until the 13Fs, but the reason why everybody knows, because when you take one of the 10% position, you have to file. So, that’s why we knew everything that was going on with Oxy. It’s not a surprise. The other thing is when you look at 13Fs, you want to look at who’s buying it. If it’s Bridgewater, it’s not a big deal. They’re going to list 200 stocks that buy and sell, whatever. They’re in and out in one second, they don’t care. You want to look at the managers, whether it’s David Tepper, whether it’s Einhorn, even so fun, Bill Blackman, these guys buy and you know, they, especially Berkshire. They’re going to hold that position for a long time and chance are, they’re going to continue to add to that position, which is big.

Frank Curzio: You don’t want to just look at 13 F say, wow, you know, Bridgewater, or, you know, some of these, you know, high frequency firms are buying because they’re not long-term holders. So, when you see Berkshire in, you could actually come in a little bit after him and be okay, because you know, he’s going to hold that position for years. That’s what they do. A lot of these guys do that. A couple of things that I would note with these, is, lots of Amazon buys and ads. Seth Carmen SOS increased Amazon position by 25%, over 2 million shares is a very, very big position. You’re looking at David Teper. Third point Viking, all bought Disney Tepper, also initiated position in Netflix as well. So usually, still streaming and both of them, like I said, I thought Netflix was much better buy than Disney here. When I look at Bill Aman, blow out his position in Netflix, right? He took a massive loss on that. It was 3 million shares. Again was he was blowing out. He was like, okay, I’m going to get, take the opportunity to buy some, which-

Daniel Creech: Can I comment on that? Yeah. I think this is the best manager job in three months. If you look at that, he bought no new positions. He didn’t add to any, he decreased Hilton and he sold the whole position. Netflix that’s the easiest work three months in the world.

Frank Curzio: And he gets paid a lot of money. He-

Daniel Creech: Didn’t. Yeah, exactly. He didn’t do anything. What-

Frank Curzio: The hell he was out after that massive fall, which was even before the market really started tanking.

Daniel Creech: I mean, I’m poking fun and having fun here, but hey yeah. Let’s trim this, sell all that. Yep. You don’t do anything else. Perfect. Yes.

Frank Curzio: Which is fun. That’s great. And give, pay me my two and 20.

Daniel Creech: I’m jealous, moving on. Sorry to interrupt. I just like that. And-

Frank Curzio: Then we had Loeb go into Disney, and he wrote a whole letter of Disney saying, you know why they want to spin off ESPN? And you know, so you had a bunch of people actually get together and go into Disney and Disney can go a lot higher for me. And you know, just like Bed Bath & Beyond go a lot higher from here. I don’t know. I’m just saying with the numbers there and the massive drag that they’re always going to have forever when it comes to streaming, just massive, massive money loser forever. It, it takes away from the great part of their business, which is the parks and everything that’s coming back and they have pricing power. Right? That’s the problem. So, what I did notice what with Disney is, you know, some buys. I know Loeb said, well, when you took a big position, it was, it was, it was a good position. It’s a million shares. It’s Viking that took a position, which you didn’t know, you don’t hear Viking. It was double that size. So, you know, was like, this is what you should do. And I like what you do here, here, here, and you should lower a cost. And I don’t think you should pay the… Well, let’s-

Daniel Creech: Get that. I know this is your favorite whipping boy, it’s not personal, but it is good. Spin off ESPN. What do you think? Yay or nay? And what he said was, hey, spin off ESPN, lever it up a little bit. Meaning add more debt to it, spin it off as its private entity that would help lower the debt at the parent company. I.E: Disney as its balance sheet because you’ve pointed out they have a ton of debt. They’re going to have to do something. They’re losing money on streaming, but the spinning off of ESPN, that’s interesting to me. What do you think?

Frank Curzio: This is what Loeb wants to do with Disney. Okay. Disney saddle, what that they have had in the company’s history right now, because of that Fox buy, which is terrible, terrible timing. I mean, Fox me out amazing on that deal, right? On a scale of 1 to 10, it was a 10 in Disney to zero one exact wrong time, those assets. And he wanted to just build the streaming business and stuff like that and have more content. Now, ESPN numbers have been a little bit of a drag. They’re trying to spin out that’s a little bit better, but here’s what lo wants to do, which is interesting. Because one first I was saying about the dividend is he’s like, don’t pay the dividend and you know, lower your cost and use that. Can’t show you can’t pay dividend. Because they can’t afford to pay the dividend. Right?

Frank Curzio: They can’t, they’re not going to reinstate the dividend. One of the few companies that paid the dividend for a long time, hast reinstated them. Also one of the few companies that you’ll find, I think outside of Boeing, it’s the only company that hasn’t seen their earnings go back to Pre-co levels. And it’s not even close. I mean, it’s like 3 to 5. They’re earning like almost $6, not even close. The reason why he wants spinoff ESPN, which I love is he’s like spin off ESPN, leverage the hell out it. So, they want to take all the debt off the balance sheet Disney, package it up in ESPN, which is a brand right now, right? Again, they have advertisements all over the place. It is still the premier sports site and people go there, but you know, they can’t have everything paid for because you just, they need the advertising dollars.

Frank Curzio: So, they need the free portion of it. Right? This is a massive thing. So, let’s take ESPN, throw a ton of debt on it, take it off Disney balance sheet. This way, everything would be much better at Disney. And we’ll get a bunch of idiots to buy ESPN. Just like we got idiots to buy every spec out there and told them, this is the greatest thing. And we’ll all go into space and you could pay 99 times sales for a hundred times sales, whatever it is. And you’re going to be great. And all these things down 80%, cause it came out the stupidest valuations ever. That’s what lo wants to do. So Disney, I’m going to tell you two things about Disney. Disney’s not going to do this. Because Disney doesn’t listen to anybody and you want proof. And this is what I learned when I took a tour through Disney with my kids when it was personal tours, not through Disney, but Universal.

Frank Curzio: So, when you had J.K Rowling wanting to put, you know, Harry Potter and that, you know, it’s amazing, right? If you’ve been the universal, the whole Harry Potter thing, they actually approached Disney first to build that until he said, sure, we’ll build it. But we’re putting Disney stuff all over it and you’re going to have to Disney this and sales and at merchandise. And they said no way, Jake was like, no way. I’m not doing this. And that’s why universal got it. So, okay. Disney does what they want to do. And they’re in a position to do that. That a great market is in a world. Now that’s a good idea to spin off ESPN. I guess that’s okay if I don’t think they will spin off ESPN, but the bottom line is they got to out of the streaming and this stock can go higher. But streaming, it’s like you are going to see everything great.

Frank Curzio: And you can say billions and billions and billions of losses because they have a number there where we have to add more subscribers. All the subscribers are adding up from overseas, including hot star, which India, every subscriber they add, the average user is a dollar 20, a dollar 20, put them prospective. The average user for Netflix is $15, right? So, they’re adding these subscribers. There’s like, look, how many subscribe is, do you notice? The more subscribers they add, the more money they lose, they lost $300 million on streaming. Last quarter, this quarter, over a billion. As they continue to add, they’re going to lose more and more and more money. You got to get rid of that business, spin off that entire business. And then Disney will be in great, great prime position because theaters are coming back. They have great content. Again, even the best content they can’t put on the… They’ll put on the streaming later on, which is fine.

Frank Curzio: But everybody goes to see that content in the movie. So, that’s why they’re seeing, if you look average, earn per user, everybody has pricing power still to this day. You’re still seeing it. They didn’t have pricing power. If you’re looking domestically average, earn per user went down. It went from like 680 to like 620, right? So, then not seeing growth, just like Netflix is not seeing growth. Nobody wants to talk about it because they’re adding all these international subscribers. Okay, fine. You’re going to get killed. This is going to work for a little while you got hedge fund managers in there. If they want to pay 30 times forward earnings for Disney right now, go ahead. I’d rather pay 20 times, 22 times forward earnings for Netflix, which has gotten murdered. It’s much cheaper. That balance sheet is better and they have better content. That’s just what I’m saying.

Frank Curzio: Maybe Disney goes a lot higher. It’s probably, there’s a big bit under it. The whole world loves Disney to have this whole entire thing. But one Disney is not going to spin off. They don’t listen to anybody Disney ever. They will never do it. They do things their own way. And when it comes to buying this stock, if you’re really thinking about buying it, because lobes in it and he’s going to, you know… Shake the cage a little bit. It’s not going to work. They’re not going to give a dividend. They can’t, they can’t afford. They’re in a massive amount of debt right here. They have a $5 billion payment due they’re see in cash flow is negative. It’s supposed to be positive this year. The numbers are really bad for Disney right now. And parks are soaring. I don’t know how much better the parks are going to get from here.

Frank Curzio: They’re like 95% capacity and you’re already raise prices tremendously. And people think we’re heading for a recession. So, I don’t know how much better that could get, but as you are topping out and I think that’s going to top out and those great results that you have from everything going on in that part of the… Of your division, it should, this is a massive, massive, massive drag. That’s going to continue. As long as you’re in streaming and these numbers again, it should. It’s just, mind boggling how last year, they’re supposed to go back to pre-COVID and then it was so bad. All the analyst said, oh, it’s okay. You know what? They’re not going to do this. You’re going to do next year. And Disney didn’t really take a hit off of that. Imagine that, hey, we’re going to, we’re going to make 10 billion this year. And I make 3 billion. And I say, no, no, it’s going to take another year. They’re like, oh, okay, no problem.

Daniel Creech: Everything trades as it is.

Frank Curzio: You know, no one will talking price or anything. So yeah, they’re all, they’re kind of lowering their estimates and they’re keeping their targets are raising their target prices, which is interesting. Again, we’re trading in a market at 17 times total earnings. You’re going to pay 32 times voter earnings per company that doesn’t have pricing power. Who’s getting murdered in streaming. And it has a terrible balance sheet. Right? And it’s cash flow negative. They don’t deserve that premium. They don’t there’s companies that do, they don’t, they’re not growing. So, you know, for me, I want to avoid it, but again, don’t listen to me because I was wrong on it. I mean, lately it’s come down a lot off the highs, but I’m surprised it actually is pushing through the 120 level. And I might go to 140 before the next quarter comes out and then they say, holy, wait a minute. We need to dial it back a little bit. We’ll see.

Daniel Creech: I know I’m nerding out here, but I just, this, this is just such a good example to me on what, like you said, fundamentals, logic, common sense. Not personal, not growing, trading at a premium. You could make an argument and be a hundred percent correct on why that shouldn’t happen. But in reality it can because they’re a big brand name, a lot of money needs to flow somewhere. They have huge, huge, asset managers and things behind it. There’s a lot of retail. That’s okay. We’re just telling you how it is. So, we’re making sense of what can seem to be chaotic, but you got to keep it in the realm of the environment, the arena that we’re in and this can happen and that’s okay. Just pay attention and put the odds on your size. But yeah, I mean you look at, I just think this is a great macro picture.

Frank Curzio: Yeah. I mean, you look at Disney, it could fall 40% from here and still have…

Daniel Creech: Crazy expensive.

Frank Curzio: On still creating more expensive than S&P 500. That’s insane.

Daniel Creech: Yep.

Frank Curzio: And, you nailed it. The only thing that matters is an investor. The only thing is a share price. Okay. It’s best, bad, bad. And beyond. There’s not a fundamental line. I would’ve told you to buy even. Cramer’s crazy to go out of business and the Reddit crowds, obviously sending out that tweet because it’s up 300% since then and I make fun of him. So, the only thing that matters is stock price. Because if you bought that, you’re a smart guy, you’re up 300% a week, which is almost impossible to do in the markets. Right? Yeah. And why don’t we talk about options? Just talk about the stock. So, the only thing that matters is the stock price. However, if it does go down or Disney goes down, you know why, okay, you can’t anybody up and say, oh my God, how the hell did this happen? Why did it come down so much? No. I mean, eventually it’s a business that numbers matter eventually. But when it comes to timing, you can get a lot of people to buy a stock and push it up and get good stories out there. But at the end of the day, the numbers, the numbers do matter. All right, you got to put up those numbers to actually run a successful business. And if you’re not, eventually the stock’s going to pull back.

Daniel Creech: So, sorry to keep going. I know we’re a little long, but if you’re playing this game and you’re up, if you bought this thing last week, take some off the table. It is not a successful trade until you do two things, you buy and then you sell. I know a handful of people that have played around this. I hope they’re all making money, but please don’t put this away and forget about it, because it… Odds are, you’re going to get smacked on this. So, I’d rather you be mad at me and you go ahead and sell and take some profits versus holding it and being mad at yourself for letting a huge winner, turn into a loss. That’s emotionally wrenching. That’s like a divorce in the stock market, Frank.

Frank Curzio: It is. And I’m not even-

Daniel Creech: Going to get we’re done with that.

Frank Curzio: Because If we had this podcast yesterday, I would’ve said the same thing you should sell. Just take profits of 22.

Daniel Creech: Yeah, but still exactly. But rather that than holding it for, let’s say two more months, and it’s back to six or at least takes-

Frank Curzio: What you say. You could sell half sell. Some of it let the rest ride, which is cool, but it’s always easy to buy. Buying is so easy. Buying is very, very easy. The hardest thing in the world to sell. That’s what the emotion comes in. I could sell for loss. Am I going to sell for gain? Am I going to be too early? If I sell, it’s going to go higher. That’s where the thing comes in. Everybody has trouble selling. It’s very difficult to sell. Everybody wants to buy the lowest and sell high, buying is easy, selling is very, very difficult. I don’t even know the advice to give Bed Bath & Beyond. I don’t even know. I wouldn’t tell you to buy. I wouldn’t tell you to sell. I don’t even know.

Daniel Creech: Not now. Hell, I just did what you did.

Frank Curzio: Yeah. It’s easy. You know what Daniel says that you should take profits right away.

Daniel Creech: There you go.

Frank Curzio: What’s your email address?

Daniel Creech: daniel@curzioresearch.com.

Frank Curzio: Yeah. Guys. Hopefully, the right crowd. And by the way, we got a good in with the red crowd. I’m friends with guys who still have the red book, Facebook pages, Chris, a great, great guy. I’m going to see him. And you know, we’ve interviewed him. I’m probably having a podcast, but yeah. Got a good in there, and they’re going to be right next to us in our TCG World with their headquarters, which is really, really cool. So, I’m looking forward to that and working with those guys really, really good stuff. So Dan, thank you so much for coming on. I really appreciate it.

Daniel Creech: Great to be back. Cheers.

Frank Curzio: All right guys. Great stuff. And any questions, comments, email me at frank@curzioresearch.com. Also, we… I will be at the Crypto Connect Expo with my team. That’s going to be in Palm Beach, Florida. If you guys are there, you can get free platinum VIP passes on our website. There’s a banner on there. It’s Crypto Connect. Just go on there, click the first one and you can get free passes to go see my ugly face in person instead of listening to me. So, whatever you guys want, that’s fine, but they are free passes. If you want to see me, we’re going to be there on Saturday and Sunday. I’m going to Thursday, lots of meetings set up. It’s going to be, you know… Really cool metaverse stuff, NFT stuff. But I will say that this is going to be a cool conference. Almost sold out. That’s being run by a great bunch of people who are going to make this very, very entertaining, which they have a habit of doing in terms of running conferences, who I spoke to. We’re going to have access to everybody. We’re going to be doing great interviews there and bringing you some new ideas, especially entities and metaverse and stuff like that. So, really getting good in and yeah, very exciting and good. I’m going to be moderating a couple panels as well. So, I’ll have time stop by our booth. There’ll be a lot of fun and you know, hopefully you join me. But again, questions, comments, anything you need, frank@curzioresearch.com. And Daniel-

Daniel Creech: daniel@curzioresearch.com.

Frank Curzio: I’m always going to make you say it. We appreciate all this support, guys. And I’ll see you tomorrow. Take care.

Announcer: Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decision solely on this broadcast. Remember, it’s your money and your responsibility.

Frank Curzio
Frank Curzio, founder and CEO of Curzio Research, is one of America’s most respected stock experts. His research is regularly featured on media outlets like CNBC’s Kudlow Report, The Call, CNN Radio, ABC News, and Fox Business News. His Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 11 million times.

Editor’s note:

Frank’s Curzio Research Advisory portfolio is up over 70% on TGT… and nearly 200% on AMZN. For immediate access to all of his favorite buys today, join Curzio Research Advisory—risk free.

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