Wall Street Unplugged
Episode: 856February 16, 2022

This ‘obvious’ trade could generate 100% gains in 12 months

Sectors from autos to apparel to semiconductors are warning of the impact inflation could have if it’s not brought under control… and the Fed needs to move aggressively to fight it. Daniel and I discuss whether the market is pricing in inflation… and why we’re skeptical of the Fed doing the right thing. [0:45] 

Speaking of higher interest rates, I share my experience getting a construction loan for my new house… and the impact higher rates could have on the housing market. [8:40]

Growth stocks continue to be extremely volatile as higher rates loom… And one of Daniel’s favorites has been unfairly hit over the past few months. Daniel explains why investors should be watching this remarkable growth story. [16:45]

Crocs (CROX) announced it would be suspending share buybacks to focus on lowering its debt. I explain why I think this is a smart move… and whether Crocs is a buy at current levels. [22:10]

Plus, we discuss the impact of easing mask requirements… and the best opportunity for 100% gains over the next year as we continue to adjust to the new normal. [25:40]

Inside this episode:
  • What the Fed needs to do to control inflation… and why it won’t [0:45] 
  • The impact of higher rates on the housing market [8:40]
  • Investors should be watching this remarkable growth story [16:45]
  • CROX’s smart move… and whether it’s a buy at current levels [22:10]
  • The best opportunity for 100% gains over the next year [25:40]
Transcript

Wall Street Unplugged | 856

This ‘obvious’ trade could generate 100% gains in 12 months

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: What’s going out there? It’s February 16th. I’m Frank Curzio and this is the Wall Street Unplugged podcast, where I break down headlines, and tell you what’s really moving these markets.

Frank Curzio: So it’s Wednesday, which means I’m bringing in the smartest, handsome guy in the world. I was waiting for you to talk because you think it’s you, Daniel.

Frank Curzio: That’s Daniel, Curzio analyst, and we break down the headlines and share different ideas and stuff and a lot going on in the markets, right Dan? I mean, a lot of news, especially over the past week.

Daniel Creech: Yeah, absolutely. We could start… There’s several way of like a Swiss Army Knife today. There’s several places we can start. We can talk about a moral victory for us humans, with the face coverings, that some big companies have announced or we can go into earnings or 13 F’s. It’s up to you, there Frank and you inspired me to get a haircut. Look at that people. Frank’s leader by example.

Frank Curzio: I know. I know. You got to see it. It was so short. It’s actually growing in, finally, now, but…

Daniel Creech: Yeah. I recognize you this morning. Last week, I was a little nervous of who I was working for.

Frank Curzio: Yeah. A little bit, a little bit like a skinhead, but now it’s growing in a little bit and I’m getting over my cold, finally. It’s not COVID but just going around and nagging a little bit but getting better by the day.

Frank Curzio: And hopefully, you’d probably hear that in my voice, but you know what? Dan, I want to start really with, inflation here because we’ve seen a couple of numbers come up and we saw the CPI come up last week, which was hotter than expected. And everyone’s saying, “Well, it was expected to be hot.” But now we’re looking at, a lot more numbers are coming in.

Frank Curzio: Right? So we’re seeing import prices up 10% year over year. PPI numbers were insane, right? So produce price index. And now we’re seeing a lot of companies, talk about this as well. And I guess the question I’m going to pose to you is, is this price into the markets? A lot of people believe this is pricing. I don’t think it’s pricing, I’m going to explain why and have details why it’s not, but what do you think?

Daniel Creech: Well, give me some more detail. What do you… Inflation continuing at these same paces? Because some of those numbers that came out today were a little lower from their peaks, which was kind of the market’s kind of taking that in stride. Right?

Daniel Creech: I don’t have that right in front of me, but I remember seeing some headlines, hey, this is good because it’s down a little bit, but we’re still are talking about very elevated. I think the market is pricing in, higher inflation for the longer term.

Daniel Creech: Yes. I do think that’s there. We can get into interest rates and how much we think that’ll, apply. But for the most part, I think people are gearing themselves for higher prices across the board as the new normal.

Frank Curzio: And that’s the thing. It’s, we all expecting higher prices across the board. For me, I’m expecting much, much higher prices and I think the Fed is really, really has to be nervous right now. I mean, you’re looking at lumber prices.

Frank Curzio: I don’t know if you were paying attention to lumber prices. So since 2010 prices average around $300-$400 and 2021 prices surged. They peaked in May at $1,700 which is insane. Right? 1700. I was like “Oh my God, look at lumber.” And then they collapsed.

Frank Curzio: And from May to December, they went back to the 450-500, level. Today they’re back up to 1300. So they doubled in 10 weeks. I’m going to bring up a chart here, so if you’re watching this on Curzio Research YouTube page, you’ll see it. If not, I’m going to explain everything, but I want you to bring this up.

Frank Curzio: And I mean, this is incredible. So, this is for the year, Daniel. Okay. And I have this up. So this is, this year, right? So, we’re in February, right? Mid-February.

Frank Curzio: Crude oil up 53%. Natural gas up 40%. Gasoline up 50%. Heating oil up 56%. I mean, you’re looking across the board. You go ethanol, you can go propane, uranium, methanol. But I mean, the prices that have gone up this year, and then you’re looking at lumber, you looking at import prices, we know it’s not transitory, but I thought we would be seeing more of a decline here and we’re not.

Frank Curzio: If retail sale numbers came out and they beat pretty easily, but it wasn’t broken down to where, are they selling more products or is it just across the selling at higher prices? And I really want to see that. So, when I look at the full picture here, I think the Fed is incredibly behind the curve.

Frank Curzio: I think 50 basis point hike, next month is a guarantee. I think we see another 50 base. I mean we have to go a hundred right away and we’ll see. But for me, I love the argument with people saying, “Well, the Fed they’re not going to do it. They’re not going to crush the market.”

Frank Curzio: I said, it’s not a choice of, they’re not, it’s they have to now. I mean, that’s how much money they put into this system. It’s resulting a runaway inflation, to the point where there’s two companies, a bunch of companies will come out.

Frank Curzio: But you’re looking at Heineken. Heineken came out and said, “It’s going to be hiking prices to offset significant, according significant and off the charts inflation.” But the company wants could lead to reduced beer consumption, right? This is, whatever product you’re talking about. Right? So you got to raise prices, where people are going to be like, I’m not paying for that shit no more.

Frank Curzio: So he said, “There’s no model that can handle this kind of inflation.” This is what they said. It’s anyone’s guess what the impact is going to be on volumes due to all the price increases. Burger King said, “Listen, the Whopper is off this count menu, because you’re looking at to raise prices, offset inflation. We’re still seeing supply issue concerns, which is direct result of inflation and demand and huge demand.”

Frank Curzio: Where Intel CEO, that’s Gelsinger said, “The company expects the supply of semiconductor wafer to remain tight, at least…” We haven’t heard this forecast, “At least through 2023.” What happened to… Remember Ford and remember GM? I mean six months ago, we’re seeing it get better. We’re seeing it get… And then also Tesla comes out and says, “Nope, we’re not seeing it get better.”

Frank Curzio: We saw Under Armor, which the position, our portfolio come out and say, hey, this supply, it seems these supply chain issues were supposed to ease and it looks like they’re starting to get a little worse now, which is, surprising to me.

Frank Curzio: For me, we’re all anticipating inflation. Now we talk about it every day. It’s just, how far would the Fed have to raise to really control this? Because we’re not seeing this, tail off as expected and we may see that. But that’s what has me worried with some of these stocks and especially growth names could talk about, some of the growth names that have gotten hit, but I just see, rates continue the rise.

Frank Curzio: I think the Fed’s well behind the curve, which I think most people agree, but I think was it Goldman just went from three rate hikes, I think in December, to four rate hikes, in January. And now they’re expecting six. I mean, we’re talking about months, we’re not talking about oh, five months past, we’re talking about just, two, three months past. That’s huge. So, now we’re looking at rates much, much higher, which is going to be significant.

Daniel Creech: It will. I will take the other side on the argument of the Fed. And I’m not saying you’re accusing me of this. I totally agree with you on them being behind the curve. I think that they, I do think it’s priced in, they’re going to raise by 50 basis points instead of so 0.5 instead of 2.5.

Daniel Creech: As they were expected a couple months ago. Where I disagree with you on saying they don’t have a choice. Frank, you need to lower your standards and your beliefs in humans. You always have a choice and you can always choose to do the wrong thing. Okay.

Daniel Creech: So, let’s say they should raise, pick a number seven times. My point is, is that I just am not sure that they’ll follow through. I hope I’m wrong on that. I just don’t give them the benefit of the doubt. Like I feel you’re doing.

Daniel Creech: Yes, they should. Yes they should increase, tonight. They should do an emergency meeting. They should. You’ve had the couple of Fed guys on different TV’s, talking about how their credibility is on the line, which is beyond funny. How you can say that with a straight face. Is-

Frank Curzio: Bullard came out hundred, base point right away.

Daniel Creech: Yeah. Exactly. But again-

Frank Curzio: Not one meeting, but over the next.

Daniel Creech: And I’m not accusing him of not being vocal and whatever. But my point is, is that, for them to talk about credibility being on the line now, is just shows you how out of pace they are and how out of touch.

Daniel Creech: So, we have to wait and see, the supply chain issues. You had Triton, is it one of the container ships. Now I’m second guessing that, but they even said that supply chains on the container level, will ease in the second half of this year. It doesn’t mean, like you said, Under Armor is still warning about it. Everybody else is still worrying about it.

Frank Curzio: Is someone doing a good job, right?

Daniel Creech: Yeah.

Frank Curzio: I’m not saying they’re not, but I’m just surprised that companies that haven’t won before.

Daniel Creech: Right.

Frank Curzio: But Under Armor was going through this great and other companies and Nike was warning and Lululemon a little bit. Those companies have done well, but Under Armor seem to be managing this. And they said, inventory levels have never at the best levels since, since in a decade.

Frank Curzio: But now Tesla warn and now you see other companies just starting to warn for the first time. It’s just, and it hit those stocks. So to me, it’s surprising, but I want to explain really quick, of why this is a big deal.

Frank Curzio: And excuse me for a second. That’s my cold, but I not going to miss the podcast because of that. So I want to explain this and Daniel’s laughing as I’m coughing. So mortgage rates, right? Let’s take mortgage rates. So mortgage rates have surged. 30 is over 4% now, about 4.15. I just, yesterday got approved, for my loan.

Daniel Creech: Hey finally. Congrats.

Frank Curzio: My house. Congrats. They told me probably about five times. It was a done deal, over the past four and a half months. So-

Daniel Creech: Let me interrupt. Not spill any beans here, but, and not to eavesdrop but man. Frank has been at the office. It’s, he’s been through the ringer on this, so I’m sarcastically laughing, but good. I’m glad it’s finally done. Are you sure it’s finally done or is it one of those like-

Frank Curzio: Hey, my closing is next week. Fine. This is a construction loan, right? So it’s a construction loan where you pay interest on it first and then it rolls over into. So into a 30 year 15, whatever I want to choose. So I locked in, which was a good thing. And this is why I kept with this company because I’ve never seen this process take so long.

Frank Curzio: Four and a half months, so much so that they had to run my credit twice for the same loan. I’ve never seen that before. They probed me as, if I was Bernie Madoff. I mean, they just kept asking for information, all the information that you would expect. But then as it went longer and longer, they asked me to resend all that information to update it on a monthly basis. I’m like, “Guys, I need to know what’s going on.”

Frank Curzio: I provide all the information and it took an incredibly long time. And for me, I couldn’t say, hey f off. Because I’m locked in 325 and I was only four months ago, four and half months ago. Now it’s over four and that’s a big deal. And I want to talk to you about that because when you’re looking at a mortgage calculator and say, it’s, you have a $500,000 home, you put in 20% down, just saying using those numbers, right?

Frank Curzio: So it’s a $400,000 loan at 3.25%, which it was four months ago that amounts to about $2,000 a month. If you use the same metrics, but change the rate to 4.15, what it is right now, that’s an extra $200 a month, right? So $2,400 extra year coming right out of the pocket, simply because rates rose, over a three, four month period. But that’s today.

Frank Curzio: I could tell you, they’re going to 5%. And when they go to 5% and you plug that into the calculator, now that’s $2,400 a month. So that’s $400 extra a month. Now you understand, that’s just through a mortgage rate, right? So now you’re looking at, at all loans, people borrowing money to grow their companies, all this leverage that’s in the marketplace that you could borrow for almost free, that’s going to change. And that’s what you’re seeing.

Frank Curzio: Even for people trying to pick off growth stocks right now, Daniel, where, I… Listen, I said, Roblox were, was a strong buy. It’s one of the best companies. And in the metaverse they just signed, who signed with them? It was Nike and the NFL, right. To build a metaverse. Right? They’re going to have tons of companies signing for them. But they warned and said we’re seeing not the expected growth. The quarter wasn’t terrible. It wasn’t terrible.

Frank Curzio: Still growing 35% and massive market for them, massive market. So in terms of the total dress of market where they can go with this, but the stock fell 20%. And that’s what you have to worry about because if you have a growth stock and they just miss a little bit, you’re done in this market.

Frank Curzio: You’re not going to… It’s, there’s no forgiveness in saying, oh, this is one quarter. They did that with Disney and said, oh you know what, forget about them earning this in 2022. They’re going to earn that now in 2023. I’ve never seen that ever. But it was just funny. Oh no. We’re just going to push everything out and maintain all of our numbers. They’re just not going to be this year going to be next year. Right? Which is kind of funny when you think about it. But for me seeing, I just don’t feel like this is priced in like a 5%, 30 year and the Fed raising super aggressively.

Frank Curzio: And again, you and I will disagree on this, but the Fed’s not going to have a choice. They can’t say, oh they’re not going to do the right. They have to. Right now, they would say, they try to push it. Remember 2% was the benchmark, it 2%. We’re going to raise rates, with seven half percent you still haven’t raised. Right?

Frank Curzio: So it’s incredible. Still, flooding the market with money over the past year, even though earnings are record highs. Everything at record high or loss of prices. House help, household. Well, is that record high, everything at record highs, right? And you still kept flooding the market with money. Now you got to be taking that out.

Frank Curzio: The Fed stuck it in a tough place. And you’re hearing, like you said. I mean, a lot of these governors are coming on and they’re saying this we’re really behind the curve here. Maybe it’s factored in. I mean, stocks are doing relatively well, right now, but I don’t know what the upside is here because maybe we see inflation subside and that could provide upside. But I think if you’re looking where’s the next move going to be? It seems it’s going to be the downside to me. And I hope I’m wrong on that. Because I know most people among stocks.

Daniel Creech: I understand that. I want to ask you a little bit of clarification on the housing thing. So those are great numbers by the way. And I believe that, the $200 a month, I don’t think is going to deter anybody, on buying a house. I think that the tailwind… Boy, do I want to get off topic on the mass mandate thing? We’ll talk about that in a minute.

Daniel Creech: I think the tailwind and the momentum behind housing, is very strong. And I don’t, I was talking to a business owner out in Arizona, who does custom pools and landscaping and things. And a little bit about this going through the housing project or the home builders thing. And you’re going to do your backyard or however you’re going to choose. The market for those, everybody on the lower income side. And remember, real quickly here the gap between rich and poor, is influenced by the Fed, which is why I have no faith in them, Frank.

Daniel Creech: $200 a month. I just don’t think is going to, I don’t think people are that up against the red line to where it’s a make or break. $400, I think that starts to get attention, but I’ll even offer. I don’t think that’s going to just deter anybody.

Daniel Creech: I think that the idea in the mentality of people getting out or wanting to move and have their own home is so powerful. That’ll do it. And to your point with lumber prices recovering, yes, they peaked and then fell and now they’re back on the rise. I would really… If you see the headlines around, mortgage rates, rising causing, Toll Brothers and different housing stocks to fall, I would really have a watch list ready to buy on those. Because I do think that that strong momentum, I don’t think those increases on the monthly side are big enough yet.

Frank Curzio: Yeah. And just say-

Daniel Creech: And I’m not saying, you’re saying, “Hey, sell housing stock.” I’m just saying-

Frank Curzio: No, I’m not saying selling-

Daniel Creech: That’s a lot of good stuff. I just-

Frank Curzio: And I’m not selling, say sell housing stocks, at all. Because even from my builder, I said how’s business, rates rising. I just met with the design center last week and they said, we’re more busy than we have been in the history of a company.

Daniel Creech: Absolutely.

Frank Curzio: And I’ve heard that from several builders. So when does it matter? Right now, I could see it not matter, but it’s all about sentiment, right? Because now if you look at your portfolio and a lot of people’s portfolios have gotten hit, right. Because you had aggressive stocks in it. And even though the market’s doing okay.

Frank Curzio: So Nasdaq, I still think is 10, one 10% off it ties. You probably have stocks that are down 20, 30% in your portfolio that got nailed, even good names got nailed. So when your portfolios going down, all of a sudden, you’re looking at your net wealth and going, wow, it was worth this and now it’s not.

Frank Curzio: And then you get interest rates going up. There is going to be a point where you’re going to be like, holy cow. I mean gasoline prices, I was paying, in Florida it was 280 and it’s 360 now. So you, it gets to a point where you’re like holy shit, you see these prices, but for the… I don’t think it’s priced in. A lot of it where the market is says, it’s pricing. I hope I’m wrong on that. But I want to see inflation subside.

Frank Curzio: We’re not really seeing that. We’re not seeing supply chains get eased, which we expected months ago. Now Intel’s like, we’re going to have problems with 2023. The current companies are not saying that. That’s telling you that most EVs aren’t going to be launched at 2024. There’s supposed to be 53 that come out this year. There’s no way that’s going to happen.

Frank Curzio: They’re going to talk a big game. And they’re going to say, well, orders up through the roof. Because people have to put 10 bucks down to buy fricking EV, just to, for now to lock it in. But at the end of the day, you’re going to see other EVs coming out and you’re going to be like, you know what? I’m going to take the 10 bucks back and a hundred bucks back. And this is available now. So, there’s going to be a huge race out there and there’s going to be winners and losers there, but not everyone’s going to be a winner in that industry. Anyway.

Daniel Creech: I’m having fun with you. Intel’s just saying that, because they just made a $6 billion purchase and they want it to be, supply chain issue too.

Frank Curzio: I know, I know. Intel’s all over the place though. Right? It’s like, every other quarter seems like-

Daniel Creech: Hey, I like that CEO though.

Frank Curzio:

And then it’s not.

Daniel Creech: I like that CEO. He’s moving up a lot. So he is moving around a lot.

Frank Curzio: No, I hear you. So, I want to say, go on.

Daniel Creech: Oh well we were talking about growth stocks. I do want to talk about one growth stock, that has gotten hammered because you brought up Roblox. And… So we’ve talked over the past couple months and as we’re seeing this transition of, high growth stocks getting sold off, this rotation into value.

Daniel Creech: I’ve talked about this in the past. There’s a company called Upstart and they’re an AI, artificial intelligence, platform. They provide platform technology to banks for lending services and things. And it’s easy to categorize, Frank here. So what I want to try to do is separate. We’re not saying, we don’t want to paint when too broad of a brush.

Daniel Creech: Yes. The market is selling off high growth stocks. Upstart has gotten absolutely smacked. I don’t know if you’re pulling that up over there. UPST Frank, if you can.

Frank Curzio: Got them now. Yep.

Daniel Creech: And you can look at this chart, that is gone from, let’s call it a hundred to 400 and then 400 back to under a hundred. And it’s popping over 20% today or at least it was a few minutes ago.

Daniel Creech: I say all that because, I’m not saying the selloff is over. Volatility’s going to continue. But this is worth looking at right now and putting on your watch list for a couple of reasons. One, this is a high growth stock, but it’s not a broke high growth stock. So you have your category of high growth, no earnings. Those are going to continue to get punished as interest rates continue to rise and anticipate rising further.

Daniel Creech: This company is actually profitable, still trades at a very high PE. So I’m not attacking you fundamentalist out there. I think the PE is still over 40. If that, I don’t know if you have that up. I think at the price to earnings, forward PE is about 40 times, which is it-

Frank Curzio: It says 60, 67 times.

Daniel Creech: Okay. Well…

Frank Curzio: But they just reported-

Daniel Creech: Yeah. They just reported solid earnings. So let me throw a few numbers at you here just as, and remember they are profitable high PE, but stay with me here. Fourth quarter 2021 highlights. This is year over year to 2020. Total revenue increased 252%. Total fee revenue increased 240%. Bank partners originated almost half a million loans for $4 billion. And that’s up 301% from a year ago.

Frank Curzio: This price that’s amazing.

Daniel Creech: Now remember this company is profitable. They’re not a lender. They provide technology to help lending. And I pulled the conference call transcript. This gentleman, I’m not even going to butcher his name the founder and CEO. He’s an ex Google employee, big wig at Google, Frank.

Daniel Creech: And I want to point this out. So on the conference call, and this is one of the reasons why we encourage everybody to go through some of these, use the control find, pick some keywords, enjoy this, dig into these companies.

Daniel Creech: He says in the conference call, “I’d like to start by reflecting on 2021. We grew revenue from 233 million in 2020 to 849 million in 2021.” That’s a hell of an increase.

Frank Curzio: Yeah.

Daniel Creech: He goes on to say all this kind of stuff, but his vision. Here’s what really stood out to me, Frank. They’re going to get in from personal loans. They’re addressable market as they get into autos and everything else. And he references, “Hey, we’re about the same size $8, $9 billion company, that Google was when I started there.”

Daniel Creech: And he talks about having this vision to be the disrupter in the main space and Google and Amazon. And those are his north stars, but he talks about the total addressable market, that they’re over. No, this is over several, few years. Several years. Is over $6 trillion in origination for loans.

Daniel Creech: Now what this product is doing Frank and they’re approving this is saying, “Hey, banks can use this, to give more loans for less default rates.” And they even… But my whole point to say, and I don’t want to come across too much as a cheerleader, because again, I’m not ignoring the fact that this stock got wrecked, from 400 down to under a hundred.

Daniel Creech: My point to say that, is that these are the kind of companies you want to look for because yes, they’re the high growth, high priced, but they… If they can grow into these, that’s going to be a hell of an opportunity. And when you go through and look at these numbers, Frank, let me ask you as a growth analyst. If you’re, trading at 40 to 60 times earnings, but you’re growing profits and net revenues by a few hundred percent. You can make the argument. That’s not crazy. That’s not a guarantee for this environment.

Frank Curzio: That’s not expensive. People make that mistake and I’m going to make that clear.

Daniel Creech: Exactly.

Frank Curzio: I make that mistake. I made that mistake early in my career. I didn’t buy Netflix. I didn’t buy Apple when I was trading at 60, 70 times forward earnings. Because I’m like, that’s crazy because I didn’t factor in that growth. But yeah.

Daniel Creech: Yeah. And so my takeaway here is, put Upstart on your watch list at least if you wanted to buy some and gain exposure to this, I would start with the third position or so. But man, when you see, we’ve talked about, Frank and I are on this big macro theme of, stock pickers market. And you want things to trade on their own fundamentals.

Daniel Creech: That’s not to say that if the market drops, this company’s going to get hit hard. I’m not. I’m not saying it’s proof. They also announced a $400 million share buyback. That’s why, one of the reasons the stock on top of the great earnings and growth.

Daniel Creech: 400 million in buyback shows you, that the management team is thinking about how to run the stock price as well as the company. Not to focus on that. That I don’t want to get crazy on that, but you want to see leaders that have been there and done that. He’s been at Google. He’s got a great story. That’s the kind of stuff you want to look at in a crazy environment as an investor, because this is a great company that earns money in a high growth area.

Frank Curzio: Yeah. No. Good, good point.

Daniel Creech: Frank, why don’t you stop me when I get on it like that?

Frank Curzio: No, I like it. I like it. Keep going, man. It’s cool. Another company that just reported, I found interesting really quick and I don’t forget the 13 F’s. We will do that next week. A lot of them, that’s when all the money managers over a $100 million, in hedge funds and stuff that managed, they have to report their whole leagues for the month. For the quarter.

Frank Curzio: And attention to see what they’re getting into and what they got out of… A lot of window dressing there too and stuff like that. We’ll cover that I think next time. Because I wanted to talk about one more stock here, which is Crocs. When I bring up a chart here of Crocs, I mean, you’re looking at, obviously the stocks went up from its lows here in the COVID lows.

Frank Curzio: It was like 10 bucks in, it went to 175. But if you look recently and this just the past couple months since November. Again, it’s you could see this, we were shown the chart in Curzio Research YouTube page. It went from 180, now it’s 96 and it’s cool to see that a company I mean, even though you’d think that they would increase their share buyback, they came out, they reported decent numbers, which is okay.

Frank Curzio: They announced it they’re going to suspend their, repurchase program, which I think is really cool. I mean, you don’t see a lot of companies do that often and instead they’re going to focus on lowering debt. So they want to keep their gross leverage on the two point, to two X, which is above that right now. But a lot of companies don’t announce that. I thought that was really interesting. And I kind of like that move and with stocks higher and risks to the market.

Frank Curzio: I wonder if we see the buybacks, you never really have to say, you’re going to suspend your repurchase program. Because when you launch a repurchase, when you say we’re buying back shares, it’s interesting, because you could announce you’re buying back 20% of your float and this is something you could announce. And you’ll announce a time period over the next 12 months, 18 months, two years. But then you could pull back. You don’t have to do it.

Daniel Creech: Right.

Frank Curzio: Which is kind of weird, right? Cause you’re now, you don’t have to do it. And they’ll monitor it every quarter. Now mention how many shares they bought back in the analysts cover this stuff. But you’re not obligating, you’re not locked into doing that. So a lot of companies would be like, okay, we’re just not going to do it or whatever.

Frank Curzio: But to make that announcement I thought was pretty cool being upfront. And I think Crocs might be a buy down here. Cut in half. The numbers are still really good. I like to focusing on debt. Demands through the freaking roof. But I guess this stock is down. I was just surprised to see that.

Frank Curzio: That’s something you don’t normally see. And I kind of like it. I like the transparency. There more transparency, always good for stocks and less is always bad when you have that uncertainty. So I thought that was pretty cool.

Daniel Creech: Absolutely. I agree. I think what stood out to me with this when you mentioned this, again, playing on the theme of stock pickers market, you want good operators, you want businesses. And this is the great example of trading versus investing. If you’re an investor in this company and you’re buying shares because you believe in this story and you want to compound your money, over the long term.

Daniel Creech: In my opinion, this is exactly what you want to see in a management team. You want them to address debt. It’s not always easy. Like you said, it’s down 5%. Their guidance was basically in line with the street. There’s a lot, there’s plenty of wiggle room there. It’s not like they came out and lowered a lot. But if you have a management team that is focusing on getting its financial house in order, you have anticipation.

Daniel Creech: Everybody knows interest rates are going to go higher. So as debt comes due, if you’re going to refinance that debt, it’s going to be at higher, higher interest rates, which means your interest payments are going to be higher. Just to your point about mortgages. That’s the same thing for businesses. So as a management standpoint, this is great or I’m sorry, from an investor standpoint, this is what you want your management team focusing on.

Daniel Creech: They just made a huge acquisition, bring it in, now they’re going to all sort it out. And I think that’s a good idea. I’ve… This company is crazy because of how volatile it is. And even though I, after I just talked about Upstart, I’ve never paid attention to this, but I would follow you in on here. I like that with the management team and this should help put a floor under the stock and borrowing anything crazy or an absolute bear market. I like that move. I think investors should cheer that.

Frank Curzio: Yeah. No. I agree. I agree. I love the transparency there. And this is stock that. Again, if you have kids, you know… I mean, Crocs, everybody, it’s just so such a massive and huge demands. So, huge demand there, they had a pretty good quarter. They load expectations a little bit down 5%, but this is a stuff that really got nailed that I think is really doing the right thing, that could be a buy and should put on your radar.

Frank Curzio: Now, last time I can’t wait to talk about, and we hinted at it, right? The reopen trade is live and well, Daniel, this is where you can make a lot of money in the market right now. The CDC just lowered the cruise ship. COVID 19 restrictions. It’s like DEFCON 1, the DEFCON 2, whatever it is.

Frank Curzio: I don’t know if one’s the worst or five’s the worst. I think it’s DEFCON. What is it? I forget which one it is, from war games. That’s what I get anyway. But they lowered it to from a very high level to just regular high, and they’re easing. That’s the point.

Frank Curzio: So, Disney just came out and said, masks are not optional, which is massive, massive, massive, massive, especially I’ve been to Disney in Florida when it hit to summertime, it’s always over 90 degrees there, wearing a mask was unbearable. I… People just, you feel you’re going to suffocate. I mean, it definitely hurt. That’s huge. Vegas, no more mask indoors. Another thing that people hate when they go to Vegas. Right? So now, I… If you’re looking from a political angle, right. And I’m not saying this to… This is about stocks.

Frank Curzio: Okay. So, don’t go crazy and send emails and that. But if you’re looking from political angle. Democratic states have more COVID restrictions in place, right? That’s a fact. Right? So, polls show that people are sick and tired of this shit. Right? They’re done with COVID. They understand the people know the risks. They know who needs to wear masks. They know who needs to be vaccinated, be protected and stuff, we know. Right?

Frank Curzio: But a lot of people are done with this shit. And now, we’re seeing a massive push to pull back all these COVID restrictions, in a lot of these states and these areas, even in New York and stuff like that in California. And ahead of the midterm elections. Right? Because that’s a big deal. It’s a big selling point. So, regardless of what you think about that or whatever, you’re seeing it across the board, you’re even seeing it international markets. It’s great for reopening. Just great for casinos.

Frank Curzio: Wynn, Las Vegas Sands have exposure to China. Wynn is more China than Las Vegas Sands. MGM has exposure to China, but I think that’s more Vegas. Red Rock Resorts was, is a company in our portfolio. That’s done fantastic. Right? We really almost bottom take that during COVID, and this is more off strip, their own off strip properties. And Dan, you talked about Red Rock Resorts, you brought up an interesting stat, which, we reported. Again, that’s in a, there’s Curzio Research Advisory portfolio, right?

Daniel Creech: No. It’s in Curzio Venture Opportunities.

Frank Curzio: Curzio Venture Opportunities portfolio. See, I can, I forget sometimes. Because it was actually that’s small. Actually the market came down so much and all these stocks got hit. We’re like, we did put a couple of, well named stocks in there, and kicked ass, but…

Daniel Creech: Yeah. Absolutely. We hit that out of the park and we, the way we came across that, firstly, if I’m not mistaken, is that we saw insiders buying that and we kind of just flagged that and then started to dig into it and realized that, hey, local communities in Vegas will come back before the main strip.

Daniel Creech: Obviously, because of restrictions and travel things that were in place at that time. One of the stats that stuck me, stood out to me, I was going through their conference call and I don’t have in front of me. So, take this with a grain of salt. It’s a poll, plus or minus, but they have between 2019 and 2021, I believe the, number of households that had moved to Vegas, because as you have, people moving around in the demand there from lockdowns. The amount of households that were making over a hundred thousand dollars or more per year grew almost 20%.

Daniel Creech: And through 2026, it’s supposed to grow at basically a compound annual growth rate of 6% to 10%. I thought that was geared towards more towards, younger. I don’t think that was correct, Frank. But my point is that you have higher income earners, because what’s the average 60-ish, 50, 60-ish. I don’t know if you take the average of the household income, but it’s probably under 62, if I had to guess.

Daniel Creech: So, Red Rock pointing out that, hey, we have families making a hundred thousand dollars or more moving in at a high pace. They’re going to capture some of that market share, at their casinos and things. That’s a huge tailwind. In addition to, like you said, this mass mandate, which is just investor sentiment, and it’s not this hoopla or this genie smoke out of a bottle.

Daniel Creech: You can’t argue the fact that when people feel good, just like a wealth effect, when your stock portfolio’s going up, you’re more had, you’re, more eager to do things, because it does feel good.

Daniel Creech: I’m not saying that’s the only reason or something to make a decision on. I’m simply saying that’s a part of our reality as emotions. If we can get the, I’ll play politics, Frank. I know you don’t like to, but you can send your hate, hate mail to me because I’m right on this.

Daniel Creech: Just like they’re not passing anything on build back better. You can’t pass things too quickly because you want to sell the idea, not the result. If something doesn’t go well and you have higher inflation, and you’ve been promising inflation’s going to go down, you don’t want that result already ahead of the midterms. You want to wait.

Daniel Creech: If I was a Democrat, I’d wait as long as I could to pass anything because then you sell the idea, not the result. And if you’re in trouble, all you have to do is release or remove, the mask mandate in schools and airlines, leading up to the election is to give a more boost of sentiment and that will happen if they need it to on the poll side.

Frank Curzio: Yeah. And Red Rock Resorts, who we recommended it in August, and I’ll give another one away here because we’re up a lot on, but Hilton Grand Vacations. That’s what we were saying. Listen, this makes a lot of sense. These are great names that they’re beaten up.

Frank Curzio: Red Rock Resorts just under $17 and it’s 52 today. So, we’re up over 200% on that position, and we continue to hold. So, it’s when I… That’s just part of it. Right? So the main point here, what I wanted to go over is how the reopen trade… Look at Expedia, right? Expedia came out with their results. And Expedia said that treads didn’t improve throughout January. And they said, in throughout January, right? So January, and we’re ahead of 2019 results in most of the recent weeks.

Frank Curzio: That is a huge statement. Okay. We haven’t heard that out of cruises. We haven’t heard that out of airlines. And we haven’t heard that out of these companies that, we heard that they’re getting much better. Remember that main revenue was down 80, 90%. They was shut down, no flights or no, nothing. Right? Everything was shut down.

Frank Curzio: Then it was like hey, 50%, 40%, 30%. We haven’t heard that. And Expedia just came out and is without international travel. This isn’t out business. So, it shows you the pricing power these companies have. Earnings are about to explode for these names. You saw Expedia report, there were great numbers, Airbnb, Priceline.

Frank Curzio: You’re looking at airline bookings, for this year, are exploding, especially international. Most countries again, rolling back those COVID restrictions. We’re going to look at business travel start coming back later this year into 2023 and one stat that, Daniel, you are going to love. I guarantee you’re going to love this. I don’t know if you know this.

Daniel Creech: All right.

Frank Curzio: Southwest bringing back booze, in the spring, to their flights.

Daniel Creech: Oh. I do like that.

Frank Curzio: Holy cow. First company to do that. I know that’s a big, big selling point for you.

Daniel Creech: It is. I’ll have to check Southwest price tickets.

Frank Curzio: Yeah. But it is-

Daniel Creech: Not being able to drink on an airplane is terrible people. That’s a dumb idea, especially for those of us like me that are scared of flying.

Frank Curzio: Yeah. That’s the thing. A lot of people are scared of flying and they do like to have a drink. I hear that from a lot of people. I mean, people are just scared of flying, but to see the bottom line, everything is getting back more, more and more and more normal. Right?

Frank Curzio: You see Disney, especially when you see those establishment. Disney was really aggressive. Vegas was really aggressive. I’ve been to Vegas in a Consumer Electronics Show and holy cow. It was wear your mask, wear your mask, wear your mask, wear your mask. It’s just… But now, you dial that back. I think you got to see airlines pretty soon say the same thing where, hey, they’re optional. Meaning if, hey, you’re over 60, you have underlying conditions, wear a mask. You should wear a mask.

Frank Curzio: But it’s everybody knows, especially in an airplane where, the air is amazing. I would say the terminals, you probably have to worry more about that. The actual airplane, that air just keeps getting re-filtered and it’s amazing.

Frank Curzio: I know a couple of pilots that actually, tell me all about that and that was a year ago. Over a year ago, but you’re looking at that trade and I think, get, there’s a lot of money to be made here. These companies are just beginning. I would say they’re in the third inning right now.

Frank Curzio: If you were in early, it was great. Then Delta hit, and then Omicron hit and you’re like holy shit. But again, when we recommended these things, we said, look, eventually this is going to go away. And what it does, these companies are going to explode because they caught, they cut costs tremendously.

Frank Curzio: And now, you’re looking at demand coming back. And with that pricing pallet they have, and people have more money than they’ve ever had and people dying to travel right now. Holy cow, there’s so many of these names, especially airlines as well, which I’ve been pushing for a while. Now, you’re really starting to move higher. I think now is definitely, if you haven’t gotten in this, it’s still early, to really get in these names. I think that a lot of these names are going to explode.

Daniel Creech: There’s a lot of, yes, there’s a lot of money to be made on that. And if you’re nervous about gaining exposure to that, just start with a smaller position size, but definitely have some exposure to this, to benefit as that this unfolds, because there is a lot of momentum behind that. And that will definitely help fight off higher inflation fears in the short-term. Absolutely. I definitely believe.

Frank Curzio: That last point here. It was what Daniel just made. It’s extremely important. Every one of our positions in our portfolios were taking, either a third position in crypto, which, listen was a great move. A lot of people came, in when crypto was higher over past three months and crypto crash. And now, you’ve seen it rebound, but we added to these positions because these are really, really good names that we like within crypto though.

Frank Curzio: Because there’s a lot of shit. 90% of the crypto market is shit. The utility tokens. There’s no utilities for some of these things going to analyze over a thousand of them now. And you’re seeing us, you’ve seen these names come back. Even now, you don’t know what’s going to happen with Russia, and I covered that yesterday, in a lot. Got a few emails.

Frank Curzio: It’s not that I’m pro-Russia. I just think that Ukraine could really… I think it’s in Ukraine’s hands to really, make sure that they’re not going to get invaded or to stop this thing. It’s not really Russia. Russia said, if you do… Look, I covered it yesterday. Again, I don’t want to sound like I’m pro Russia. I’m just saying I wanted to provide both sides of the story because here we are saying, that Ukraine’s this nice innocent little country, that’s hey stop bothering us and stuff. And it’s not like that.

Frank Curzio: There’s a reason why Russia, right now is really, really coming after them because they’re doing shit that Russia said in 2013, don’t do or we’re going to have problems. So hopefully, that eases the situation, but you don’t know what’s going to happen there.

Frank Curzio: You don’t know if the Fed might get a little crazy. If these numbers go nuts, maybe they… I don’t think they’ll go, 75 basis point hikes, but let’s see, they might go 50 and said, listen, we’re going to be really, really aggressive the rest of the year. You need to pay attention to that. Start slow, small positions and add over time I think that’s the best, best way, right?

Daniel Creech: Yeah, absolutely. Because you don’t want to hinder yourself or get so caught up in headlines in short terms to not do anything. Inaction is not what you want. You want to have exposure here. You can limit that, but definitely have exposure to this because the stock market still generates, amazing returns, and you want to invest alongside capitalism while we still got it.

Frank Curzio: Definitely makes sense. So guys, that’s it for us. Thanks Daniel so much for coming on.

Daniel Creech: Cheers.

Frank Curzio: Questions, comments. Be free to email frank@curzioresearch.com. That’s frank@curzioresearch.com. I always say this, really appreciate all the support. I’ll see you guys 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 12 million times.

Editor’s note:

This week, Luke Downey reminded his readers the best time to buy is when there’s “blood in the streets.”

While other investors are panicking… Luke uses painful selloffs to pick up the highest-quality stocks… at unheard-of discounts.

And when the market rebounds—which it always does—his Big Money Report subscribers could be richly rewarded

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