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Speaker 1: Pushkin.

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Speaker 2: Hey, it's Jacob. We'll be back next week with a

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Speaker 2: new episode of What's Your Problem. But in the meantime,

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Speaker 2: I wanted to share another show I've been working on.

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Speaker 2: It's called Unheedged and it's hosted by Ethan wo a brilliant,

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Speaker 2: funny economics reporter at the Financial Times. The show comes

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Speaker 2: out twice a week and it's basically Ethan and his

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Speaker 2: colleagues at the FT explaining what's happening in finance and markets.

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Speaker 2: I could go on about the show, or I could

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Speaker 2: just play you a recent episode. So here is a

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Speaker 2: recent episode.

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Speaker 3: I hope you like it. They are sexy, they are salubrious,

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Speaker 3: they are magnificent. They are the seven tech stocks propping

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Speaker 3: up the S and P five hundred. But which are

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Speaker 3: the sexiest the most salubriums. Today on the show, we

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Speaker 3: have two contestants duke it out and a draft style

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Speaker 3: game for the most magnificent tech stocks at the top

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Speaker 3: of the market. This is on Hedge, the Markets and

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Speaker 3: financihow from the Financial Times and Pushkin. I am reporter

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Speaker 3: Ethan Woo, your host today for this tech stock rumble.

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Speaker 3: In one corner, we have rob Value, this armstrong I'm

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Speaker 3: here to win, Nathan, when are you not? And in

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Speaker 3: the other corner we have Elaine putting the flex back

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Speaker 3: into Lex more.

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Speaker 4: Hi, I'm gonna love about the mess.

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Speaker 3: You're also here to win. You're on, I'm here to

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Speaker 3: beat Rob.

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Speaker 4: That's the most important.

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Speaker 3: That that is the most important. Elaine is the deputy

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Speaker 3: head of lex and our resident tech stock expert. And today,

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Speaker 3: Elaine and Rob, you're both going to pick three of

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Speaker 3: your favorites out of the seven tech stocks in a

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Speaker 3: draft style competition, and there will be one left over.

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Speaker 3: The criteria for your decision making is from today July thirteenth,

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Speaker 3: twenty twenty three, to the end of the year December

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Speaker 3: thirty First, which stock will have the best price appreciation

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Speaker 3: in the market. That's your metch And since first pick

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Speaker 3: is very important, we're gonna have a little trivia question

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Speaker 3: a little over under to decide who gets that first pick.

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Speaker 3: But first, what are our seven stocks?

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Speaker 1: Rob Our seven stocks are Alphabet, Meta, Apple, Microsoft, Amazon,

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Speaker 1: in Vidia, and Tesla.

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Speaker 3: Of these, I think pretty much inarguably the stock doujors

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Speaker 3: in Vidia. I mean, it's just had a preposterous run

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Speaker 3: up in both valuation and its stock price, so today

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Speaker 3: for the privilege of getting first pick. In the second

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Speaker 3: quarter of twenty twenty two, in Vidia earned fifty one

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Speaker 3: cents per share. What is the bottom up analyst estimate

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Speaker 3: for the second quarter of twenty twenty three. I'm giving

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Speaker 3: you two dollars, Elane, do you take over or under

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Speaker 3: on two dollars? Over over robi? Okay, take the under. Okay.

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Speaker 3: In Vidia's analyst estimate for the second quarter of twenty

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Speaker 3: twenty three is two dollars and six cents a share,

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Speaker 3: just over two dollars. It's pretty much quintupled in the

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Speaker 3: space of a year. So I'm sorry, Rob Elaine's going

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Speaker 3: to get the first.

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Speaker 4: Pick today after a flying start.

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Speaker 3: Okay, Ellen, which of the magnificent seven are you starting with?

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Speaker 4: And why I'm going from video? I'm starting strong.

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Speaker 3: There you go.

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Speaker 4: I know the haters will say that competition is coming

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Speaker 4: and video work keepers advantage forever, but I can't think

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Speaker 4: of a meeting I've been to this year that hasn't

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Speaker 4: included AI in there somewhere. And then Vidia is completely

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Speaker 4: out on its own in providing semiconductors in this market.

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Speaker 4: So Jensen Twang noted star like on cool leather jacket

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Speaker 4: is leading the way, and there's no Intel. There's nobody

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Speaker 4: else you can compare to Nvidia right now. So even

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Speaker 4: if we've had the stock rock it up this year,

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Speaker 4: he was handing out hints about what the second half

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Speaker 4: of the year might be, but without giving any numbers.

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Speaker 4: And I have a feeling that when we get the

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Speaker 4: next set of earnings, we'll hear some numbers, and I

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Speaker 4: think the stock is just going to bounce up even further.

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Speaker 1: Elaine, that's it's very interesting that you pick in video first,

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Speaker 1: because I have before me my secret draft order list,

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Speaker 1: and I put Nvidia last. Not only did I put

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Speaker 1: it last, I put it last for the exact same

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Speaker 1: reasons that you put it first. We are at peak

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Speaker 1: AI hype. The stock trades at sixty times earnings as

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Speaker 1: of a few days ago. Anyway, it had over almost

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Speaker 1: two hundred percent price return for the year.

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Speaker 3: This is a.

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Speaker 1: Great stock that is at the absolute top of investor excitement.

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Speaker 1: So they only need to step on a very small

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Speaker 1: banana peel to fall directly on their faces.

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Speaker 3: Yeah, and given this as a second half bet decent

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Speaker 3: chance of a reversal, you might have to think, no way,

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Speaker 3: no way I mean I should say that.

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Speaker 1: I say this as a person who got into finance

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Speaker 1: working as a for a value investment shop and looking

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Speaker 1: for stocks that are cheap and underappreciated. So partly you

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Speaker 1: see my biases talking here, and for the last ten

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Speaker 1: years having a value orientation has worked exactly zero times.

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Speaker 1: Yeah for me. So history is on a lane side. Yeah, ill,

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Speaker 1: and you might be a good shape.

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Speaker 4: I agree that we're in the midst of AI height.

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Speaker 4: What I don't agree with is the idea that that's peaked.

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Speaker 4: There are so many companies that are still trying to

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Speaker 4: figure out their AI strategy. What they all want is

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Speaker 4: compute power. They don't really understand how they're going to

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Speaker 4: price or what kind of AI services they're going to

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Speaker 4: use or sell. But what they all want is the

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Speaker 4: ability to have some kind of AI that they can

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Speaker 4: tell investors that they are including in their company. And

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Speaker 4: if you want that, then you have to have in

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Speaker 4: videos services. And because it's the only one that has

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Speaker 4: the chips that will do this, there is no competition

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Speaker 4: right now. I agree with you on the valuation and

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Speaker 4: if you look for a cheap stock, of course, and

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Speaker 4: videos not that. But I think if We're just talking

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Speaker 4: about the second half of this year, and video is

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Speaker 4: just going to keep on going up. What stands in

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Speaker 4: it's way? What is the banan appeal that could come along?

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Speaker 1: That's the thing about banana peals. You don't see them,

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Speaker 1: You don't see them going, and don't see them till

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Speaker 1: you step on them.

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Speaker 3: Okay, Rob Eleen's done you a great favor of taking

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Speaker 3: your bottom pick off the table table. What's your first pick?

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Speaker 1: Uh, I'm taking Microsoft, and I'll tell you why.

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Speaker 3: Now.

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Speaker 1: This pick would have been very easy to make before

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Speaker 1: yesterday's inflation numbers, because I was pretty much in the

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Speaker 1: recession camp for you know that the economy would slow

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Speaker 1: a lot towards the end of the year, and I

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Speaker 1: was thinking, you're gonna want Microsoft because it has business customers.

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Speaker 1: In a slow down, the business customer will keep buying

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Speaker 1: Microsoft's stuff. Also, reasonable valuation expectations are not very high.

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Speaker 1: Earnings growth for this year is expected to come in

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Speaker 1: like mid single digits. It hasn't run up as much

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Speaker 1: as some of these It's up forty percent this year,

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Speaker 1: which is a lot less than some of the others.

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Speaker 1: I just have this feeling that's solid old Microsoft in

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Speaker 1: a group of stocks that has had a great first

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Speaker 1: half of the year, with the possibility of some choppy

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Speaker 1: weather coming in the second half of the year, Microsoft

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Speaker 1: might come out ahead.

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Speaker 3: I don't.

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Speaker 1: I'm not terribly optimistic about the stocks in general for

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Speaker 1: the second half of the year. So like, if they're

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Speaker 1: all do so, so, I think Microsoft will do the best.

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Speaker 3: Yeah so so, yeah, I know we've seen its cloud

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Speaker 3: computing business be kind of the source of resiliency as

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Speaker 3: other tech companies are struggling. Yeah, all right, that's round one.

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Speaker 3: Elaine's chosen Nvidia and Rob's chosen Microsoft. Elaine Round two.

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Speaker 3: Five left, what's your next pick? She's taking Tesla.

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Speaker 4: Now, no, I'm gonna I'm going to take Apple. And

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Speaker 4: it is very much not because of the mad expensive

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Speaker 4: three thousand, five hundred dollars mixed reality headsets that they announced,

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Speaker 4: but then that they're not even going to start selling

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Speaker 4: until next year. What matters for Apple is that it

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Speaker 4: is still the lead in smartphone markets. Smartphone market hasn't

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Speaker 4: been amazing, but because Apple is still very much the

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Speaker 4: king of that market and it keeps on selling these

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Speaker 4: high margins services, the company is throwing off so much

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Speaker 4: cash it can afford to experiment free cash flow five

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Speaker 4: times sides of metals, while Meta is just draining its

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Speaker 4: budget into the metaverse. Apple has so much more, had

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Speaker 4: a one hundred and sixty six billion of cash marketable securities,

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Speaker 4: keep saying it's going to keep handing it out. If

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Speaker 4: you were looking at Baluy stocks, it's not the best.

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Speaker 4: It's not some kind of hidden gem, but I think

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Speaker 4: that it's solid.

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Speaker 3: But elater. Are we at peak smartphone saturation?

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Speaker 4: We keep on thinking we're at peak smartphone saturation. Didn't

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Speaker 4: we think that about three or four years ago ago?

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Speaker 4: For me, Yeah, someone comes out with an incredibly expensive

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Speaker 4: new version or a version that's half the price and

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Speaker 4: has half the power, and everybody buys it. Also, if

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Speaker 4: you keep on producing phones that smash, that keep running

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Speaker 4: slow after a year, then I guess there is no

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Speaker 4: such thing as satuation.

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Speaker 1: I shudder to agree, but I agree. This was my

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Speaker 1: second pick.

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Speaker 4: Grudging consent.

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Speaker 3: I no.

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Speaker 1: I think, first of all, Apple's an amazing company for

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Speaker 1: a million reasons that I could talk about. I don't

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Speaker 1: think the stock is terribly expensive relative to the other ones.

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Speaker 1: And I also like it because it is not only

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Speaker 1: the smartphone leader. It is the high end smartphone leader,

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Speaker 1: and if there is anything we've learned over the last

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Speaker 1: couple of years, the high end has been a sweet

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Speaker 1: spot for the market. Marketing to the richer end of

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Speaker 1: the economy has just plain worked. Expectations for this year

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Speaker 1: are low, too, agreed. Yeah, people think they're going to

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Speaker 1: have a year hard time lapping the excellent year they

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Speaker 1: had last year. A lot of room for this company

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Speaker 1: to surprise to the upside. Maybe I should have taken

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Speaker 1: Apple first.

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Speaker 4: The thing is, if there's no growth anywhere, then it

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Speaker 4: doesn't matter so much that smartphone sales aren't rocketing, because

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Speaker 4: the comparison against other tech socks is not about growth profitability,

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Speaker 4: and it's about how much cash you're sitting on.

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Speaker 3: Well, what's your next pick?

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Speaker 1: We're the meaty middle, the meady middle, and the hard

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Speaker 1: part of the draft. I am stuck between two names here,

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Speaker 1: and I really, I honestly don't know which way to go.

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Speaker 1: But because I picked steady Microsoft as the first pick,

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Speaker 1: a pick designed to help in a weakening economic environment,

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Speaker 1: I'm going to take Amazon next. Now this goes against

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Speaker 1: my value. Investors in general hate Amazon, but what I

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Speaker 1: like about Amazon is that the stock hasn't gone up

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Speaker 1: very much over five years. It's gone up a lot

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Speaker 1: this year, but it's been parked where it is. If

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Speaker 1: the consumer is strong for the rest of the year.

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Speaker 1: They just reported they had like their first day of

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Speaker 1: Prime Day was the biggest still ever. So the concern

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Speaker 1: with the stock, why it's been parked for a couple

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Speaker 1: of years now is because people feel like the retail

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Speaker 1: business is not that strong. Maybe it surprises to the upside.

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Speaker 1: AWS continues to be a great business, and maybe the

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Speaker 1: fact that the stock has gone nowhere in five years

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Speaker 1: lights of fire under the management. Maybe they start turning

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Speaker 1: the profit dial a little bit, which is something that

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Speaker 1: they've always had the ability to do earn more money

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Speaker 1: than they earn, but they've always put the money back

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Speaker 1: into the business instead. Maybe they start shifting that mix

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Speaker 1: to get the stock moving.

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Speaker 3: Amazon Amazon second pick for you. Surprising to me. I

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Speaker 3: thought this was going to be one of the underdogs

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Speaker 3: coming into this. It should be yeah, yeah, yeah.

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Speaker 4: They spent seven billion dollars on shows for their streaming service.

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Speaker 3: Yes, and they were all right, and they were all.

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Speaker 1: Yeah, the streaming business, it's a problem. The structure of

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Speaker 1: the streaming business is the reason Netflix isn't one of

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Speaker 1: the big tig stocks anymore. Right, And you have put

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Speaker 1: your finger on the hardest bit. And that is evidence

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Speaker 1: of what I talked about their incredible appetite for investment

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Speaker 1: over time. Investors seem finally to have become a bit

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Speaker 1: wary about that. They ate it up for twenty years,

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Speaker 1: and now they're kind of looking at this thing and

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Speaker 1: saying it's not the world of two thousand and five anymore.

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Speaker 3: Yeap, all right, that was round two. Elaine's chosen Apple

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Speaker 3: and Rob's chosen Amazon. Elaine, what do you got for

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Speaker 3: round three? We've got Meta, Tesla and Google left.

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Speaker 4: I wouldn't touch Meta.

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Speaker 3: They've got Threads. Come on, now, I.

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Speaker 4: Do quite love Threads, but they've done so much cost

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Speaker 4: cutting is any so far they can go? So I

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Speaker 4: think that's kind of it for Meta. I'll go Alphabet,

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Speaker 4: which is a weird one in a way because it's

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Speaker 4: investing a lot in AI, and yet AI could kind

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Speaker 4: of eliminate their central search business. But Microsoft being hasn't

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Speaker 4: taken over from Google Search. I don't know anybody that

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Speaker 4: goes straight to when they're looking something up online. Valuation

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Speaker 4: multiples are fairly low. There's really low debt to equity ratio.

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Speaker 4: That digital advertising market seems to be doing a lot

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Speaker 4: better or was definitely doing a lot better in the

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Speaker 4: last quarter than it was towards the end of last year.

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Speaker 4: It's not my favorite of all the tech stocks, but

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Speaker 4: it would be definitely my pickover Tesla and Metal.

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Speaker 3: Yeah. Well, Elaine, am I right to detect attention in

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Speaker 3: kind of your in Vidia pick and your Alphabet pick.

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Speaker 3: You're betting their AI hypees not over. It's going up

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Speaker 3: up into the right, but it's not going to cannibalize

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Speaker 3: Alphabet's core business.

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Speaker 4: I mean, Alphabet is kind of trying to callibalize its

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Speaker 4: own business. That's quite strange. I guess my feeling about

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Speaker 4: AI is that it's the classic You want to back

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Speaker 4: the stock that's selling the tools. So it doesn't really

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Speaker 4: matter what happens to AI next year or whether this

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Speaker 4: all turns out to have been over overhyped. If there's

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Speaker 4: investment going on right now, you want to be backing

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Speaker 4: the company that's selling the compute power, and that's Nvidia.

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Speaker 3: Yeah. Yeah, So William's picked in Nvidia, Apple and Alphabet.

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Speaker 3: Rob has Microsoft, Amazon, and he is now going to

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Speaker 3: settle the cage match between Mark Zuckerberg and Elon Musk

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Speaker 3: by picking Meta or Tesla.

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Speaker 1: I'm taking Meta, and I'm taking Meta because I'm not

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Speaker 1: taking Tesla. Okay, As a value guy, I can't touch

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Speaker 1: a stock that is up one hundred and twenty three

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Speaker 1: percent this year, even while estimates of its earnings this

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Speaker 1: year have fallen. So all the work of getting that

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Speaker 1: stock up and more has been done by its valuation,

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Speaker 1: not by its performance. I hear the cars are great.

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Speaker 1: I think Tesla might win the What are the ultimate

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Speaker 1: fighting they're doing? Are they doing jiu jitsu.

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Speaker 4: Of zuckabug his mma trying?

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Speaker 1: Now he's like all skinny, like the big fat Zuck.

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Speaker 3: No, Zuck's ripped. Have you seen it? No?

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Speaker 1: No, no, no, I'm saying Zuck like the person who

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Speaker 1: is physically larger just wins, right. And my impression is

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Speaker 1: that whatever the appearance of their body, musk is bigger.

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Speaker 3: Have you seen musk not musk suck shirtless recently? Yes,

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Speaker 3: it's impressive. Each Muscles don't win fights, that is what

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Speaker 3: I'm saying. And did promise to sit on Zuck in

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Speaker 3: a fight.

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Speaker 1: Between two people who are not fighters. Just pick the

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Speaker 1: bigger one.

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Speaker 3: That's the rule.

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Speaker 1: But for the stock, for the star now, Meta has

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Speaker 1: had an incredible run, and a lot of that is

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Speaker 1: to do with them saying we won't be quite as

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Speaker 1: stupid as we were before. That's put the stock up

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Speaker 1: one hundred and fifty percent or something.

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Speaker 3: This year.

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Speaker 1: They downplayed the stupid metaverse and they have, you know,

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Speaker 1: promised to focus on efficiency as you referred to earlier online.

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Speaker 1: I think your concern is exactly right. Where do they

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Speaker 1: go from here? It seems like all the good stuff

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Speaker 1: they can do is now priced in the stock. However,

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Speaker 1: it's trading at a kind of market multiple. It costs you

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Speaker 1: the same thing as the S and P five hundred.

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Speaker 1: It's a very profitable company. I think you know they're okay,

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Speaker 1: sixth pickout of seven.

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Speaker 4: Yeah, but how do you downplay the metaverse when you've

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Speaker 4: called your company Meta and you've spent thirty seven billion

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Speaker 4: dollars minimum on it. You have to keep spending on it,

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Speaker 4: You have to keep pushing forward unless you change your

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Speaker 4: name back to Facebook.

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Speaker 1: The fact is Facebook is sitting there with seventeen kajillion

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Speaker 1: users worldwide looking at its products, it has Instagram, and

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Speaker 1: the fact that the founder lives in a complete fantasy

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Speaker 1: world probably doesn't matter all that much.

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Speaker 3: Elane, do you do you have a higher estimation of

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Speaker 3: Tesla that meta?

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Speaker 4: Yes, that's not saying much.

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Speaker 3: Is it semore? Same work?

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Speaker 4: Well, the cars are good, the charging network is expanding.

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Speaker 4: That's going very well. That means potentially, you know, another

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Speaker 4: big source of revenue if it's opened out globally and

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Speaker 4: lots of other car company needs use the charging stations

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Speaker 4: and give money to Tesla model why sales are going

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Speaker 4: quite well, but there are so many red flags. The

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Speaker 4: big price cuts they've been using to lift sales that

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Speaker 4: are just dragging on operating margins, and the idea that

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Speaker 4: you're betting on people's willingness to buy big, expensive cars.

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Speaker 4: And if there is any kind of uncertainty about the economy,

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Speaker 4: that will go badly wrong. Where's the cyber truck? I

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Speaker 4: don't know self drive modes auton of driving.

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Speaker 3: Is the time where the windows broke during the stage demonstration.

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Speaker 4: Yeah, that's the one. It looks cool, but it's nowhere

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Speaker 4: all right.

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Speaker 3: Thank you both for these picks. Elaine has Nvidia, Apple Alphabet,

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Speaker 3: Rob has Microsoft, Amazon, meta and nobody picked Tesla, and

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Speaker 3: people have been short Tesla a long time and the

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Speaker 3: stock's proven a lot of doubters wrong. But maybe this

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Speaker 3: time is different. We'll have to check back at the

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Speaker 3: end of the year and see how our drafts did.

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Speaker 1: I feel terrible about my picks now I'd.

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Speaker 3: Like to take it off back.

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Speaker 4: I feel great about mine. I'm looking forward to going

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Speaker 4: back and Jimson about them.

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Speaker 3: If Tesla is the best performing stock out of all

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Speaker 3: of these, I think we will.

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Speaker 1: We will eat an actual crow on the podcast. I

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Speaker 1: don't know where you get a crow, but I assume

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Speaker 1: you can order one from an It's just.

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Speaker 3: The both of you crying well hacking away a crow.

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Speaker 3: All right, We'll be back in a minute to talk

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Speaker 3: about the stakes of our bet. Welcome back. This is

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Speaker 3: normally the part of the show where we do a

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Speaker 3: long and a short, but instead, for this special episode

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Speaker 3: of on Hedge, we're discussing what the shame and the

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Speaker 3: glory is going to be for the winner and the

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Speaker 3: loser of this bet. Rob suggested eating a crow live

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Speaker 3: on the podcast. I don't want to do that.

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Speaker 1: That's that we only have to do that if if

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Speaker 1: Tesla is the best performer the unpicked. Yes, member of

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Speaker 1: the Magnificent seven is the best performer of the bunch.

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Speaker 3: We do this star this annual stockpicking contest on the

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Speaker 3: Unhedged newsletter, and you know we write either a maya

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Speaker 3: culpa or a hey we got it right piece every year.

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Speaker 3: Maybe we can do something like that.

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Speaker 1: I'm always happy to write a MAPA is my is

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Speaker 1: my strength, your bread and butter. I mean, should we

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Speaker 1: put should we bet on it? Elaine?

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Speaker 4: Sure?

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Speaker 1: Dinner? A beer?

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Speaker 4: I say beer? Well, uh yeah, A green.

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Speaker 3: Juice, yes, no, an iced coffee.

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Speaker 1: I hereby bet you the alcoholic beverage of your choice

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Speaker 1: that my picks will prevail.

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Speaker 3: She's going to take you to one of the Martini

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Speaker 3: places you reviewed a couple months back, and it's going

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Speaker 3: to be Martini.

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Speaker 4: I don't know why I didn't say yes to dinner.

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Speaker 4: And she's the most expensive place I can think of,

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Speaker 4: because my bets are definitely going to do best in

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Speaker 4: the os. But I'll take I'll take an expensive drink, okay.

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Speaker 1: One expensive drink at the winner's choice of venue.

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Speaker 3: Perfect rob Elaine will see you both back here in January.

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Speaker 3: One person will be hanging their head in shame. One

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Speaker 3: person will be pounding their chest in glory looking forward

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Speaker 3: to that. All right, listeners will catch you next week

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Speaker 3: for another episode of Unheedged see then. Unhedged is produced

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Speaker 3: by Jake Harper and edited by Brian Erstadt. Our executive

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Speaker 3: producer is Jacob Goldstein. We had additional help from toeprafoeheads.

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Speaker 3: Cheryl Brumley is the FT's global head of Audio special

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Speaker 3: thanks to Laura Clark, Alistair Mackie, John Schnarz, Eric Sandler,

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Speaker 3: and Jess Trulia. FT Premium subscribers can get the Unheedged

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Speaker 3: newsletter for free, and a ninety day free trial is

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Speaker 3: available to everyone else. Just go to ft dot com

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Speaker 3: slash Unhedged offer. I'm Ethan Woo. Thanks for listening.

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Speaker 4: A