This is it…
As I mentioned last week, this is the last episode of Frankly Speaking that will be available to the public. Moving forward, it will only be available to Curzio Research members. If that’s like the end of Game of Thrones, don’t worry. I tell you how you can still access this podcast—and a lot more amazing research.
How do you rebalance your portfolio with a huge winner? A listener asks about this great problem to have. I break down the art of portfolio management… and explain why sometimes the best move is to do nothing [0:50].
I also answer a timely question about trade war investing. Is it time to take cover or look for opportunities? I tell you what you can learn from the recent earnings season… and what companies will outperform the market when a trade deal is reached [11:43].
|Frank X. Curzio
Founder and CEO, Curzio Research
Frankly Speaking | 61
The last Frankly Speaking?
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 Friday, May 24th. I’m Frank Curzio, host of the Frankly Speaking Podcast, we answer all of your questions. The markets, stocks, economy, sports, anything else you want to throw at me. I created this podcast to answer more of your questions that you were sending me through my Wall Street Unplugged Podcast, which I host every single Wednesday.
Frank Curzio: If you want any questions answered just send me an email at firstname.lastname@example.org, that’s email@example.com. Be sure to put ‘frankly speaking’ in the headline, and you never know, your question might be the one I read on this podcast.
Frank Curzio: Let’s jump right in here. Question from [Eddie 00:00:52]: “Hey Frank, I think it’s a good idea to offer this podcast, Frankly Speaking, just to paying members. If someone can’t pony up the penance, you charge for Curzio Research Advisory. Then they don’t need to be a free loader. Just my opinion. On to my question. I was able to get into Microsoft at 32 dollars a share several years back and am up about 260% as I write this. This is growing to be 35% of my portfolio, and has carried the bulk of the load. How important is rebalancing an account to not have so many eggs in one basket? On one hand I hate to sell such a winner. Then again, if I have to sell it or if it has a setback I could get hurt pretty badly. Thank you so much. Paid up lifetime member.”
Frank Curzio: So Eddie the first part is you think it’s a good idea to offer the podcast to just paying members? Guys last week I said Frankly Speaking won’t be available on iTunes anymore. It’s only going to be available to paid subscribers, so it’s going behind our pay wall. And you tell everybody why, why we offer a lot of free stuff and I just think it’s much better to take questions and answer those questions for people who are paying for our services.
Frank Curzio: You know we have a very low price for Curzio Research Advisory that I put out for you guys personally because, this way you can get access to really good research, Wall Street research at an affordable price. So if anyone does want to subscribe please send me an email at firstname.lastname@example.org which is perfectly cool it’s fine. But this is the last podcast for Frankly Speaking that’s going to be found on iTunes, from now on its gonna be sent directly to everyone who is a subscriber to our services. It’s going to have a nice little link because a couple of people were worried. And they were saying, ‘Whoa, you know it’s so easy to get it on iTunes, I’m not going to be able to get it anymore!’
Frank Curzio: It’s going to have a link, there’s a media player, you can click it, you can listen to Bluetooth on your radio, you can listen to it when you’re driving, or when you’re jogging or whatever. Just click it, it’s going to work, it’ll be perfectly fine. It’s just not going to be available on iTunes to be uploaded all the time but, if you do have any questions, please send them to email@example.com. If you’re not a subscriber it’s going to go through a whole filter process and I’ll never see the question, but if you are a subscriber it’s going to go through me and those are the questions that I’m asked.
Frank Curzio: Now you’re a subscriber, so I’m not going to give away too much, where if a CRA asks about a certain question, or if a CVO subscriber asks about a certain question, I’m not going to give away too many stock picks but you’ll see it’s going to be much more personal, it’s going to be really cool and again, I really want to help those people who are paying for our services because we do offer Wall Street Unplugged which is a free podcast guys, we do have so many free services for you guys to use, to get introduced to our stuff, but now that we’re growing we really want to focus on the people who are paying for our stuff and this is one way for us to do it.
Frank Curzio: Now, let’s get to Eddie’s question! Because he says he bought Microsoft at $32 a share, [inaudible 00:03:40] back, he’s up 260% and he’s basically saying, ‘Look, it’s 35% of my portfolio, should I sell this, should I not?’ Listen, if I was a financial advisor 101, you know, sell a position, sell half when you’re up 100%, you didn’t do that, look how much you’re up. So look, this is a message I’ve been trying to tell you at least over the past month or so. How people are set in their ways with investment strategies. ‘This is the way it’s supposed to be done, sell half when you’re up 100%, diversify your holdings,’ yet most billionaires don’t diversify their holdings. They put all their eggs in one basket.
Frank Curzio: So, for me to tell you that you’re up so much on this that yes, it’s 35% of your portfolio but I don’t think you could have did a better job of buying almost any other stock. I mean, Microsoft’s gone straight up, it is a conservative name, when you look at a risk-adjusted basis. Man, it’s been one of the best stocks to own, at least over the past few years. Now, a lot here has to do with your head. Because you want to make sure, and this is why I always say if you’re going to get into position don’t take a full position at once. Take a quarter position, take a half position, why? Because if the stock runs up you’re going to be happy, because you own half of it, then you wish you had a full position, and if it goes down you’re not going to be too pissed off because you could add a second half to your position and lower your cost base.
Frank Curzio: For a position like this that’s 35% of your portfolio, all the fundamentals look great on Microsoft, it looks fantastic. With that said, you never know. I mean if this thing takes a twenty or 30% hit it’s really going to hurt your portfolio so sell a portion of it, to the point where you’re still happy, still going to be a big stake in your portfolio, maybe twenty percent. Again, I’m giving advice of what I would do personally, giving broad advice. You want to sell, diversify so you can buy more of the stocks I’m recommending, but it’s… I’ve been through this through my career.
Frank Curzio: There was this woman that walked into my dad’s office when I was younger and it was a great lesson. It was probably 2005, four or five I believe. I’d say, yeah, the recession was two thousand, 2002, the market started coming back, technology started coming into favor and the lady had a $3 million portfolio and she wanted my dad to manage it. That was a lot of money to us, I think we had probably about $75 million in management at the time. Walked right into our office, Queens New York, just out of nowhere. My dad looked at her portfolio, she had twenty stocks, I would say about 30% of the portfolio was in three stocks, maybe Intel and, you know, just really good names, and my dad said, ‘Look, there’s nothing I can do with this portfolio. There’s nothing I can do for you, it’s a great portfolio, it’s perfect and just keep what you have and you should be fine.’
Frank Curzio: And I remember that day and I was just saying, ‘Wow, who says that? Someone walks in with $3 million, again it would have been a big account, oh, I’ll get you diversified, I have to do…’ There’s nobody that actually would have said that, right? And it was a great lesson for me just to show the integrity of my dad, but I guess the point I’m trying to say here is look, you’ve done a great job with Microsoft, right? You’re asking me what you should do and you’ve done better than probably 99.9% of the people on Wall Street, so sell a portion of it but keep it as your biggest position.
Frank Curzio: Sell a portion where, hey if it goes down you’re like, ‘Wow, I’m glad I sold it,’ and if it goes up you’re like, ‘Wow, I still have a big position.’ A lot has to do with psychology, and if you sell it to the point where it’s a 5% position, and Microsoft skyrockets, you’re going to get really pissed off, you’re probably going to buy a lot higher, you just do stupid things, just like when you have a loss and you don’t want to sell it, it goes down 20%, 40%, 50%. Your head is what gets in the way, right, because all you’re doing is thinking about that loser when there’s thousands of other names and probably a good few dozen that are great buying opportunities but you’re focused on that loser wondering why it’s down and you’re losing money, should I in, I lost more money on it…
Frank Curzio: I mean that’s the advice I would give you on Microsoft. I think your best bet is to keep at least a 20% position, sell a little bit, you’re up a ton on it, and then diversify into some other stocks. We have a lot in our portfolio, you’re a subscriber, a lot of good ideas I’m going to give you every month through my network, through things that I find, I travel the world. I’m always on the road, and speaking at conferences, and finding new ideas and presenting new ideas to you guys. So, that’s the advice I would give, it’s probably advice you won’t hear anywhere else, they’re going to tell you ‘Well you diversify, bring it down to a 5% position.’, but I know I’m talking to a person who just made a fortune on one stock and right now it’s the best stock in the world.
Frank Curzio: I’m pretty sure Microsoft right now has the largest market gap of any company, between them and Amazon, but it’s hard for me to say, ‘Oh, just sell a 35% position!’, because if you told me this when the stock was up 100% anyone would say, ‘Hey, you know what, sell half. This way you lower your risk, your cost base is basically zero.’ Yet you held on and look how much you made and that’s how you really disrupt markets, accelerated gains. Again, when you’re taking on more risk, that’s what happens. So it became just more of your portfolio, percentage-wise but look, that’s… again if you’re looking at most billionaires they didn’t make their money by diversifying across fifty different ideas. Now, they took on big, big big risks, and that’s how you do it.
Frank Curzio: But that might not be in your personality and maybe, I don’t know what your age is either. I mean, if you’re eighty years old hey, sell some of this, definitely. If you’re in your forties then keep 20%, maybe a little bit more of that position. So age matters and there are so many factors but at the end of the day it’s about you. I can give you advice, you can talk to fifty other financial planners, they’re going to give you advice but you have to feel comfortable that you made so much money on this stock, at what percentage are you going to be comfortable, well, if it went down, you’re going to be happy because you sold some but if it goes higher hey, you still own a significant piece, because if you look at investing in Netflix…
Frank Curzio: If you’re looking at investing in Cisco twenty years ago, I mean how many stocks can I name? So many of the great companies, you know the Googles the Amazons. Imagine you didn’t sell those positions and how much money you would have made. Probably would have did pretty well. So that’s my advice, make sure it’s a big enough position, I’d say over 20%, again nobody’s really going to give you that advice, but who am I to give you advice anyway? You’ve done great on a really good stock pick and Microsoft is probably going higher, at least over the next few years, they’re just perfectly, perfectly positioned.
Frank Curzio: Okay let’s get to the next question and it’s from [Ira 00:10:15]. He says, “I’m a listener [inaudible 00:10:17] and interested in the Curzio Research Advisory promotion you mentioned in the last Frankly Speaking podcast.” So again, Ira’s talking about how you can subscribe to a newsletter now Frankly Speaking’s going to go behind a paywall and its very easy guys, I created a link for you, it’s curzioresearchoffer.com. Go to that and you’re going to get a special discount, it’s going to be $49 to subscribe for the year for my newsletter. Not for a month, for a year. You’re going to get an issue every single month, you get a lot of research, you get ten pages of research on every position, you get bonus reports, just a lot of really good, detailed research with new ideas coming out all the time, it’s definitely worth the money.
Frank Curzio: I have a price point on this where everybody could have access to this, they’ll have access to real hardcore Wall Street research, again once you see it you’re going to see how much effort goes into every pick, you’re going to see different investment styles, you’re going to see a bunch of my contacts. It’s a pretty cool newsletter guys if you want to subscribe, again that’s going to give you access to the Frankly Speaking podcast going forward. Once you’re subscribed, I’m going to send you the link to that podcast every time, on Friday, and again it’s going to be a media player, just click it and you’re going to be perfectly fine, that’s curzioresearchoffers.com.
Frank Curzio: Moving onto the next question, this one’s from Jonathan. He says, “Hey Frank, should we be heading for cover right now or adding to positions and putting more money to work in hopes this trade deal will eventually happen. I have cash on the sidelines thanks to you, and I took profits on several of your winners. I will follow your advice on this like I have over the past ten years. Thanks for everything you do.” So, Jonathan, since you’re going to follow my advice on this no matter what, here’s what I want you to do: make a cheque payable to Frank Curzio, all the money I made you, send it to me and I’ll see you when I see you.
Frank Curzio: I appreciate that, I mean that’s a great endorsement right there, I’m glad you’ve been around for such a long time. Again, I’m not going to be right in all situations, I’m right more times than I’m wrong or I wouldn’t have been doing this for over twenty years. Very honest and up front with the research that we do so yeah, I’m glad you’ve stuck around and usually, people who stick around, they do pretty well, all right? There’s going to be periods when, hey you know what, the market’s not going to be too good or you just have a bad streak just like every other investor. But overall, over the long term, it’s a very very good sample size where you can see the research, what strategies I use, sometimes it’s growth, sometimes it’s value, sometimes it’s technicals, bottoms up, tops down, whatever the market’s telling us, but you’ve got to learn all these strategies too, and I’m glad that you’ve made money on this.
Frank Curzio: Now, to your question Jonathan. Should we be heading to cover right now? I had an interesting back and forth on Wall Street Unplugged on Wednesday with Andrew Horowitz about the trade wars, and he’s like, “We have a trade war right now!” I’m like, “It’s not a trade war. It’s not a trade war. Not yet.” There’s going to be a solution. It just makes sense. I mean, we’re not telling China to change their military, or to do something drastic, we’re just saying, ‘Hey, you know what? Stop stealing our intellectual property and let’s do something with the trade deficit here. All right, what can we sell you, let’s make this more balanced, whatever we can do.’ So we’re not asking too much here and it’s going to be a benefit to both of our economies.
Frank Curzio: China’s going to be the biggest economy in the world, it’s up to them whether it’s going to be ten, 15 years or fifty years, it’s up to them. If they do things right, they report the numbers right, they’re the fastest growing developed economy and that will continue and you’re really going to mess with that if this deal doesn’t get signed. There’s so much that can go on behind closed doors to make this happen. Now, should we be putting more money to work? Absolutely. Absolutely. We’re not going to be talking about this next year, there’s not going to be anything to be talking about, it compares to the Zika virus when it scared the crap out of people in Brazil, the Olympics. When have we heard about Zika virus since then, we haven’t, even though some of the greatest athletes in the world chose to skip it because they were so scared. It’s the same thing here.
Frank Curzio: This is a deal that works and it has to work for two amazing economies in two amazing countries. They’re going to make it happen. Even on China’s side they’re going to make it happen unless they want to go into depression and unless Trump wants to get elected he has to make it happen on his side… and he definitely wants to get elected… because people are going to vote based on their wallet and right now they’re doing very well. Trump, if it was this year he’d easily get elected, next year let’s see, but I can’t picture him playing hardball and… we were able to withstand it much, much better than China. Our economy’s in much better shape, but a lot of that had to do with tax reforms, so even though we have tariffs if you combine them with tax reforms companies still grew earnings by 20% last year. So this year is going to be a lot hotter, it’s going to hurt us, so I just can’t picture Trump looking to really hurt our markets and that goes to saying, ‘What would you invest in?’
Frank Curzio: Well, I’m looking at earning right now and it’s kind of interesting, I’m seeing a couple of like, Splunk report great numbers, [Raze 00:15:32] Guidance have come down. Tariffs are a bit of a concern. [Intuit 00:15:37] 10% off its highs, 12% off its highs. Just reported a great quarter. Raze Guidance. Macy’s! Macy’s reported a great quarter. I know it sounds crazy, right. They reported a great quarter, stock was at six or seven percent at one time, it finished with a down, like 1%. You know why? Because 1: Macy’s trading at a 52 week low. People are going to tell you, ‘Department stores are dead, it’s horrible!’ It’s the same story when the stocks trade at 35, 37, 38, 40. It’s twenty bucks.
Frank Curzio: So, when you’re looking at Macy’s a lot of that’s factored in and the quarters show that they’re doing things right. I mean they’ve really blew out the earnings number and what do they do? They report it in [inaudible 00:16:18] guidance because they said, ‘Listen this tariff thing, if it really happens, our guidance doesn’t include tariffs.’, so they’re being conservative with that guidance and they will be impacted by tariffs and have to maneuver a few things around so the stock got hit. Now, what happens what you take that away? Because Macy’s was trading at a 52 week low and reported great earnings. I cover this a lot, I look for companies that are completely beat up, completely reorganizing, starting to cut costs and trying to turn their companies around because you see a massive gain in these stocks. They’re so depressed, the cost-cutting’s automatically going to add to earnings and it flows right to the bottom line. Now you’re a leaner company, if you can turn around operations now your earnings are really going to accelerate and that’s when a company explodes, where you get the 100, 200, 300% gains, on well-known companies.
Frank Curzio: Now, Macy’s trading on a 52 week low tells me, well tells us, what? It tells us that people believe the analysts estimates are too aggressive still! They don’t think Macy’s is going to meet their numbers. So when a company’s at a 52 week low and reports in-line numbers you usually see a 10% pop. It means hey, you know what, the bottom’s probably in. Analysts are getting this right, you’re seeing a little bit of a turnaround. It’s when you’re trading at a 52 week low and your stock and your [inaudible 00:17:37] guidance all report terrible earnings and lower guidance, that’s when you’re going to get hit. Macy’s easily beat earnings, reported good revenue numbers and said, ‘You know what, we’re going to keep our guidance in line though, because we don’t want to get too aggressive, because we don’t know what’s going to happen with tariffs.
Frank Curzio: In the end, we know what’s going to happen with tariffs, right? It’s going to be figured out. It’s definitely going to be figured out. These two idiots are not going to destroy their economies. They’re not going to do it. Okay, unless Trump doesn’t want to get elected, unless, I don’t care, he’s in forever, [inaudible 00:18:07], I get it, but unless he wants to destroy, take a massive setback of five to seven years, because you are choosing not to do business with the biggest economy in the world because you’d rather continue to lie, cheat, steal intellectual property? ‘Oh, we’re still going to lie and cheat.’ Doesn’t matter. This isn’t you being bullied here, this is about doing the right thing. Just do the right thing. You have an amazing economy, you can grow it, it’s awesome, love China’s economy, love the Asian economy but just do the right thing here.
Frank Curzio: And if both of these guys do the right thing, then you’re going to see this trade war end and you’re going to see stocks surge because right now, almost… man, I want to say almost every company I’m looking at their guides are all reporting in-line guidance even if they blew out the quarter! They’re reporting in-line guidance. Best-buy, same thing. Great numbers, yet they reported in-line guidance and [inaudible 00:19:06] said, ‘Hey, we’re worried about tariffs.’ There’s no way, that’s why I’m surprised, even Splunk raised their estimates and the stock still got hit. I mean it’s up a ton, they just reported great earning, raised their guidance but these companies and management teams are smart, there’s a lot of uncertainty going forward. You don’t know what’s going to happen with tariff’s. Huawei, just suppliers getting cut out of nowhere, dropping 18 to 20%, there’s a lot of uncertainty in the markets right now where, if you’re a CEO, no, don’t go for this crazy aggressive guidance, be conservative.
Frank Curzio: Who cares if the stock gets hit, who cares what happens in the short term if you’re a CEO. You know if you’re making numbers, your stock’s going to go higher, if you’re growing it it’s fine. Can’t help it if people are scared, they’re going to run to the exits but it’s smart to say, ‘Let’s be conservative in case these tariffs do hit, in case these two idiots are just stubborn enough to just destroy two of the best economies in the world, we’ll see what happens.’ But I tell you, Trump loves himself too much to do that, he’ll resolve this and say the US won even if they didn’t and I know China has to come to a deal because we’re asking them to do something that’s logical.
Frank Curzio: Stop lying and cheating. Stop stealing our freaking intellectual property, come on. That’s what we’re asking you to do. We’re not asking you to get rid of your air force or anything, or change, or just… we’re not asking you to do anything drastic, just do the right thing here. We have two leaders that do the right thing, which I think is going to happen because common sense just makes sense right? If that happens it’s going to be great news for stocks because I’m telling you right now, those earnings estimates are super conservative, they’re all in line right now and they’re going to go up tremendously because we’re going to have a low interest rate policy, a favorable Fed policy with a lot of cash on the balance sheets, a lot of buybacks still taking place, valuations are not super-[inaudible 00:20:56].
Frank Curzio: So if you remove this tariff overhang you’re going to see this market surge going into next year and you want to buy the companies that are reporting good earnings, and there’s a lot of them that are reporting good earnings. I thought Macy’s earnings were great. Can’t say that for Dillard’s, Nordstrom, while their competitors, Lowe’s… man, their CEO left J.C. Penney after he destroyed that company, now look what he’s doing to Lowe’s, pretty crazy. I don’t know how these guys continue to get jobs when they just … I don’t know … it’s another rant, argument, I won’t even go there. Anyway… there’s a lot of great names, guys, look at the names that sold off reporting strong earnings for the quarter and beat the numbers and reported in-line guidance and then, on the call, they talked about, ‘Hey, you know what, tariffs aren’t factored in.’
Frank Curzio: It sounds like a lot, but I bet you 30% of the companies on the S%P 500, you’ll find they beat earnings but kept their yearly guidance the same, right. It kind of doesn’t make sense, why wouldn’t you raise it? Well, they’re not raising it because they’re concerned about tariffs. Again, I’m talking to a person that loves earning season, listens to calls, that just digs into this stuff, I live it, I love it, I like it, I would do it even if I didn’t get paid. There’s a lot of conservative guidance out there: if we remove the tariff overhang, which common sense tells us is probably going to happen unless Trump doesn’t want to get elected and unless China wants to take five years backward and go into a depression. This is going to be resolved probably over the next six months and when it does, you’re going to see stocks roar higher.
Frank Curzio: Not the whole market, you’ll see the market go higher, but the individual names that are reporting that conservative guidance, guys, do your homework. Trust me, it’s about 30% of the S%P 500 that looks very very attractive here, trading at cheap valuations and they’re easily going to beat those earnings estimates going forward, they’re just being conservative because of tariffs. Jonathan, I think you got your money’s worth on that question. That’s for sure.
Frank Curzio: Anyway guys, I want to thank you so much for listening, again last episode of Frankly Speaking. It’s going to go behind a paywall, so all of the subscribers out there that we have, the thousands and tens of thousands, awesome, email me: firstname.lastname@example.org, I’m here for you, okay. I want to provide you guys great research, answer the questions that you may have. You’re going to get this podcast as long as you’re subscribed to any one of our services and we’ll be emailing to you. If you’re interested in subscribing to Curzio Research Advisory, again guys $49 for the year, it’s less than to fill a tank of gas and you’re going to get great research, I promise you that. If not, you can cancel your subscription, we offer a thirty day money back guarantee, if you’re like, ‘Well Frank!’, and you think I’m full of shit, or you’re not happy, whatever. Go, thirty day money back guarantee if not, if you want it, if not it’s okay, but to get access to Frankly Speaking you have to be a subscriber going forward.
Frank Curzio: So I want to thank all of you for listening, if you’re interested in getting that $49 offer, which you’re not really going to see everywhere, we sell our newsletter for a lot more than that, but I just wanted to provide the special offer for you guys, it’s www.curzioresearchoffers.com, just go to that website, and you’ll be able to subscribe to our newsletter for that discounted price. Guys, that’s it from me, thank you so much for listening and, if you’re a subscriber to any of our products at Curzio Research, you know what? I’ll see you in seven days, take care.
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