Speaker 1: Pushkin.
Speaker 2: Hey, it's Jacob. We'll be back next week with a
Speaker 2: new episode of What's Your Problem. But in the meantime,
Speaker 2: I wanted to share another show I've been working on.
Speaker 2: It's called Unheedged and it's hosted by Ethan wo a brilliant,
Speaker 2: funny economics reporter at the Financial Times. The show comes
Speaker 2: out twice a week and it's basically Ethan and his
Speaker 2: colleagues at the FT explaining what's happening in finance and markets.
Speaker 2: I could go on about the show, or I could
Speaker 2: just play you a recent episode. So here is a
Speaker 2: recent episode.
Speaker 3: I hope you like it. They are sexy, they are salubrious,
Speaker 3: they are magnificent. They are the seven tech stocks propping
Speaker 3: up the S and P five hundred. But which are
Speaker 3: the sexiest the most salubriums. Today on the show, we
Speaker 3: have two contestants duke it out and a draft style
Speaker 3: game for the most magnificent tech stocks at the top
Speaker 3: of the market. This is on Hedge, the Markets and
Speaker 3: financihow from the Financial Times and Pushkin. I am reporter
Speaker 3: Ethan Woo, your host today for this tech stock rumble.
Speaker 3: In one corner, we have rob Value, this armstrong I'm
Speaker 3: here to win, Nathan, when are you not? And in
Speaker 3: the other corner we have Elaine putting the flex back
Speaker 3: into Lex more.
Speaker 4: Hi, I'm gonna love about the mess.
Speaker 3: You're also here to win. You're on, I'm here to
Speaker 3: beat Rob.
Speaker 4: That's the most important.
Speaker 3: That that is the most important. Elaine is the deputy
Speaker 3: head of lex and our resident tech stock expert. And today,
Speaker 3: Elaine and Rob, you're both going to pick three of
Speaker 3: your favorites out of the seven tech stocks in a
Speaker 3: draft style competition, and there will be one left over.
Speaker 3: The criteria for your decision making is from today July thirteenth,
Speaker 3: twenty twenty three, to the end of the year December
Speaker 3: thirty First, which stock will have the best price appreciation
Speaker 3: in the market. That's your metch And since first pick
Speaker 3: is very important, we're gonna have a little trivia question
Speaker 3: a little over under to decide who gets that first pick.
Speaker 3: But first, what are our seven stocks?
Speaker 1: Rob Our seven stocks are Alphabet, Meta, Apple, Microsoft, Amazon,
Speaker 1: in Vidia, and Tesla.
Speaker 3: Of these, I think pretty much inarguably the stock doujors
Speaker 3: in Vidia. I mean, it's just had a preposterous run
Speaker 3: up in both valuation and its stock price, so today
Speaker 3: for the privilege of getting first pick. In the second
Speaker 3: quarter of twenty twenty two, in Vidia earned fifty one
Speaker 3: cents per share. What is the bottom up analyst estimate
Speaker 3: for the second quarter of twenty twenty three. I'm giving
Speaker 3: you two dollars, Elane, do you take over or under
Speaker 3: on two dollars? Over over robi? Okay, take the under. Okay.
Speaker 3: In Vidia's analyst estimate for the second quarter of twenty
Speaker 3: twenty three is two dollars and six cents a share,
Speaker 3: just over two dollars. It's pretty much quintupled in the
Speaker 3: space of a year. So I'm sorry, Rob Elaine's going
Speaker 3: to get the first.
Speaker 4: Pick today after a flying start.
Speaker 3: Okay, Ellen, which of the magnificent seven are you starting with?
Speaker 4: And why I'm going from video? I'm starting strong.
Speaker 3: There you go.
Speaker 4: I know the haters will say that competition is coming
Speaker 4: and video work keepers advantage forever, but I can't think
Speaker 4: of a meeting I've been to this year that hasn't
Speaker 4: included AI in there somewhere. And then Vidia is completely
Speaker 4: out on its own in providing semiconductors in this market.
Speaker 4: So Jensen Twang noted star like on cool leather jacket
Speaker 4: is leading the way, and there's no Intel. There's nobody
Speaker 4: else you can compare to Nvidia right now. So even
Speaker 4: if we've had the stock rock it up this year,
Speaker 4: he was handing out hints about what the second half
Speaker 4: of the year might be, but without giving any numbers.
Speaker 4: And I have a feeling that when we get the
Speaker 4: next set of earnings, we'll hear some numbers, and I
Speaker 4: think the stock is just going to bounce up even further.
Speaker 1: Elaine, that's it's very interesting that you pick in video first,
Speaker 1: because I have before me my secret draft order list,
Speaker 1: and I put Nvidia last. Not only did I put
Speaker 1: it last, I put it last for the exact same
Speaker 1: reasons that you put it first. We are at peak
Speaker 1: AI hype. The stock trades at sixty times earnings as
Speaker 1: of a few days ago. Anyway, it had over almost
Speaker 1: two hundred percent price return for the year.
Speaker 3: This is a.
Speaker 1: Great stock that is at the absolute top of investor excitement.
Speaker 1: So they only need to step on a very small
Speaker 1: banana peel to fall directly on their faces.
Speaker 3: Yeah, and given this as a second half bet decent
Speaker 3: chance of a reversal, you might have to think, no way,
Speaker 3: no way I mean I should say that.
Speaker 1: I say this as a person who got into finance
Speaker 1: working as a for a value investment shop and looking
Speaker 1: for stocks that are cheap and underappreciated. So partly you
Speaker 1: see my biases talking here, and for the last ten
Speaker 1: years having a value orientation has worked exactly zero times.
Speaker 1: Yeah for me. So history is on a lane side. Yeah, ill,
Speaker 1: and you might be a good shape.
Speaker 4: I agree that we're in the midst of AI height.
Speaker 4: What I don't agree with is the idea that that's peaked.
Speaker 4: There are so many companies that are still trying to
Speaker 4: figure out their AI strategy. What they all want is
Speaker 4: compute power. They don't really understand how they're going to
Speaker 4: price or what kind of AI services they're going to
Speaker 4: use or sell. But what they all want is the
Speaker 4: ability to have some kind of AI that they can
Speaker 4: tell investors that they are including in their company. And
Speaker 4: if you want that, then you have to have in
Speaker 4: videos services. And because it's the only one that has
Speaker 4: the chips that will do this, there is no competition
Speaker 4: right now. I agree with you on the valuation and
Speaker 4: if you look for a cheap stock, of course, and
Speaker 4: videos not that. But I think if We're just talking
Speaker 4: about the second half of this year, and video is
Speaker 4: just going to keep on going up. What stands in
Speaker 4: it's way? What is the banan appeal that could come along?
Speaker 1: That's the thing about banana peals. You don't see them,
Speaker 1: You don't see them going, and don't see them till
Speaker 1: you step on them.
Speaker 3: Okay, Rob Eleen's done you a great favor of taking
Speaker 3: your bottom pick off the table table. What's your first pick?
Speaker 1: Uh, I'm taking Microsoft, and I'll tell you why.
Speaker 3: Now.
Speaker 1: This pick would have been very easy to make before
Speaker 1: yesterday's inflation numbers, because I was pretty much in the
Speaker 1: recession camp for you know that the economy would slow
Speaker 1: a lot towards the end of the year, and I
Speaker 1: was thinking, you're gonna want Microsoft because it has business customers.
Speaker 1: In a slow down, the business customer will keep buying
Speaker 1: Microsoft's stuff. Also, reasonable valuation expectations are not very high.
Speaker 1: Earnings growth for this year is expected to come in
Speaker 1: like mid single digits. It hasn't run up as much
Speaker 1: as some of these It's up forty percent this year,
Speaker 1: which is a lot less than some of the others.
Speaker 1: I just have this feeling that's solid old Microsoft in
Speaker 1: a group of stocks that has had a great first
Speaker 1: half of the year, with the possibility of some choppy
Speaker 1: weather coming in the second half of the year, Microsoft
Speaker 1: might come out ahead.
Speaker 3: I don't.
Speaker 1: I'm not terribly optimistic about the stocks in general for
Speaker 1: the second half of the year. So like, if they're
Speaker 1: all do so, so, I think Microsoft will do the best.
Speaker 3: Yeah so so, yeah, I know we've seen its cloud
Speaker 3: computing business be kind of the source of resiliency as
Speaker 3: other tech companies are struggling. Yeah, all right, that's round one.
Speaker 3: Elaine's chosen Nvidia and Rob's chosen Microsoft. Elaine Round two.
Speaker 3: Five left, what's your next pick? She's taking Tesla.
Speaker 4: Now, no, I'm gonna I'm going to take Apple. And
Speaker 4: it is very much not because of the mad expensive
Speaker 4: three thousand, five hundred dollars mixed reality headsets that they announced,
Speaker 4: but then that they're not even going to start selling
Speaker 4: until next year. What matters for Apple is that it
Speaker 4: is still the lead in smartphone markets. Smartphone market hasn't
Speaker 4: been amazing, but because Apple is still very much the
Speaker 4: king of that market and it keeps on selling these
Speaker 4: high margins services, the company is throwing off so much
Speaker 4: cash it can afford to experiment free cash flow five
Speaker 4: times sides of metals, while Meta is just draining its
Speaker 4: budget into the metaverse. Apple has so much more, had
Speaker 4: a one hundred and sixty six billion of cash marketable securities,
Speaker 4: keep saying it's going to keep handing it out. If
Speaker 4: you were looking at Baluy stocks, it's not the best.
Speaker 4: It's not some kind of hidden gem, but I think
Speaker 4: that it's solid.
Speaker 3: But elater. Are we at peak smartphone saturation?
Speaker 4: We keep on thinking we're at peak smartphone saturation. Didn't
Speaker 4: we think that about three or four years ago ago?
Speaker 4: For me, Yeah, someone comes out with an incredibly expensive
Speaker 4: new version or a version that's half the price and
Speaker 4: has half the power, and everybody buys it. Also, if
Speaker 4: you keep on producing phones that smash, that keep running
Speaker 4: slow after a year, then I guess there is no
Speaker 4: such thing as satuation.
Speaker 1: I shudder to agree, but I agree. This was my
Speaker 1: second pick.
Speaker 4: Grudging consent.
Speaker 3: I no.
Speaker 1: I think, first of all, Apple's an amazing company for
Speaker 1: a million reasons that I could talk about. I don't
Speaker 1: think the stock is terribly expensive relative to the other ones.
Speaker 1: And I also like it because it is not only
Speaker 1: the smartphone leader. It is the high end smartphone leader,
Speaker 1: and if there is anything we've learned over the last
Speaker 1: couple of years, the high end has been a sweet
Speaker 1: spot for the market. Marketing to the richer end of
Speaker 1: the economy has just plain worked. Expectations for this year
Speaker 1: are low, too, agreed. Yeah, people think they're going to
Speaker 1: have a year hard time lapping the excellent year they
Speaker 1: had last year. A lot of room for this company
Speaker 1: to surprise to the upside. Maybe I should have taken
Speaker 1: Apple first.
Speaker 4: The thing is, if there's no growth anywhere, then it
Speaker 4: doesn't matter so much that smartphone sales aren't rocketing, because
Speaker 4: the comparison against other tech socks is not about growth profitability,
Speaker 4: and it's about how much cash you're sitting on.
Speaker 3: Well, what's your next pick?
Speaker 1: We're the meaty middle, the meady middle, and the hard
Speaker 1: part of the draft. I am stuck between two names here,
Speaker 1: and I really, I honestly don't know which way to go.
Speaker 1: But because I picked steady Microsoft as the first pick,
Speaker 1: a pick designed to help in a weakening economic environment,
Speaker 1: I'm going to take Amazon next. Now this goes against
Speaker 1: my value. Investors in general hate Amazon, but what I
Speaker 1: like about Amazon is that the stock hasn't gone up
Speaker 1: very much over five years. It's gone up a lot
Speaker 1: this year, but it's been parked where it is. If
Speaker 1: the consumer is strong for the rest of the year.
Speaker 1: They just reported they had like their first day of
Speaker 1: Prime Day was the biggest still ever. So the concern
Speaker 1: with the stock, why it's been parked for a couple
Speaker 1: of years now is because people feel like the retail
Speaker 1: business is not that strong. Maybe it surprises to the upside.
Speaker 1: AWS continues to be a great business, and maybe the
Speaker 1: fact that the stock has gone nowhere in five years
Speaker 1: lights of fire under the management. Maybe they start turning
Speaker 1: the profit dial a little bit, which is something that
Speaker 1: they've always had the ability to do earn more money
Speaker 1: than they earn, but they've always put the money back
Speaker 1: into the business instead. Maybe they start shifting that mix
Speaker 1: to get the stock moving.
Speaker 3: Amazon Amazon second pick for you. Surprising to me. I
Speaker 3: thought this was going to be one of the underdogs
Speaker 3: coming into this. It should be yeah, yeah, yeah.
Speaker 4: They spent seven billion dollars on shows for their streaming service.
Speaker 3: Yes, and they were all right, and they were all.
Speaker 1: Yeah, the streaming business, it's a problem. The structure of
Speaker 1: the streaming business is the reason Netflix isn't one of
Speaker 1: the big tig stocks anymore. Right, And you have put
Speaker 1: your finger on the hardest bit. And that is evidence
Speaker 1: of what I talked about their incredible appetite for investment
Speaker 1: over time. Investors seem finally to have become a bit
Speaker 1: wary about that. They ate it up for twenty years,
Speaker 1: and now they're kind of looking at this thing and
Speaker 1: saying it's not the world of two thousand and five anymore.
Speaker 3: Yeap, all right, that was round two. Elaine's chosen Apple
Speaker 3: and Rob's chosen Amazon. Elaine, what do you got for
Speaker 3: round three? We've got Meta, Tesla and Google left.
Speaker 4: I wouldn't touch Meta.
Speaker 3: They've got Threads. Come on, now, I.
Speaker 4: Do quite love Threads, but they've done so much cost
Speaker 4: cutting is any so far they can go? So I
Speaker 4: think that's kind of it for Meta. I'll go Alphabet,
Speaker 4: which is a weird one in a way because it's
Speaker 4: investing a lot in AI, and yet AI could kind
Speaker 4: of eliminate their central search business. But Microsoft being hasn't
Speaker 4: taken over from Google Search. I don't know anybody that
Speaker 4: goes straight to when they're looking something up online. Valuation
Speaker 4: multiples are fairly low. There's really low debt to equity ratio.
Speaker 4: That digital advertising market seems to be doing a lot
Speaker 4: better or was definitely doing a lot better in the
Speaker 4: last quarter than it was towards the end of last year.
Speaker 4: It's not my favorite of all the tech stocks, but
Speaker 4: it would be definitely my pickover Tesla and Metal.
Speaker 3: Yeah. Well, Elaine, am I right to detect attention in
Speaker 3: kind of your in Vidia pick and your Alphabet pick.
Speaker 3: You're betting their AI hypees not over. It's going up
Speaker 3: up into the right, but it's not going to cannibalize
Speaker 3: Alphabet's core business.
Speaker 4: I mean, Alphabet is kind of trying to callibalize its
Speaker 4: own business. That's quite strange. I guess my feeling about
Speaker 4: AI is that it's the classic You want to back
Speaker 4: the stock that's selling the tools. So it doesn't really
Speaker 4: matter what happens to AI next year or whether this
Speaker 4: all turns out to have been over overhyped. If there's
Speaker 4: investment going on right now, you want to be backing
Speaker 4: the company that's selling the compute power, and that's Nvidia.
Speaker 3: Yeah. Yeah, So William's picked in Nvidia, Apple and Alphabet.
Speaker 3: Rob has Microsoft, Amazon, and he is now going to
Speaker 3: settle the cage match between Mark Zuckerberg and Elon Musk
Speaker 3: by picking Meta or Tesla.
Speaker 1: I'm taking Meta, and I'm taking Meta because I'm not
Speaker 1: taking Tesla. Okay, As a value guy, I can't touch
Speaker 1: a stock that is up one hundred and twenty three
Speaker 1: percent this year, even while estimates of its earnings this
Speaker 1: year have fallen. So all the work of getting that
Speaker 1: stock up and more has been done by its valuation,
Speaker 1: not by its performance. I hear the cars are great.
Speaker 1: I think Tesla might win the What are the ultimate
Speaker 1: fighting they're doing? Are they doing jiu jitsu.
Speaker 4: Of zuckabug his mma trying?
Speaker 1: Now he's like all skinny, like the big fat Zuck.
Speaker 3: No, Zuck's ripped. Have you seen it? No?
Speaker 1: No, no, no, I'm saying Zuck like the person who
Speaker 1: is physically larger just wins, right. And my impression is
Speaker 1: that whatever the appearance of their body, musk is bigger.
Speaker 3: Have you seen musk not musk suck shirtless recently? Yes,
Speaker 3: it's impressive. Each Muscles don't win fights, that is what
Speaker 3: I'm saying. And did promise to sit on Zuck in
Speaker 3: a fight.
Speaker 1: Between two people who are not fighters. Just pick the
Speaker 1: bigger one.
Speaker 3: That's the rule.
Speaker 1: But for the stock, for the star now, Meta has
Speaker 1: had an incredible run, and a lot of that is
Speaker 1: to do with them saying we won't be quite as
Speaker 1: stupid as we were before. That's put the stock up
Speaker 1: one hundred and fifty percent or something.
Speaker 3: This year.
Speaker 1: They downplayed the stupid metaverse and they have, you know,
Speaker 1: promised to focus on efficiency as you referred to earlier online.
Speaker 1: I think your concern is exactly right. Where do they
Speaker 1: go from here? It seems like all the good stuff
Speaker 1: they can do is now priced in the stock. However,
Speaker 1: it's trading at a kind of market multiple. It costs you
Speaker 1: the same thing as the S and P five hundred.
Speaker 1: It's a very profitable company. I think you know they're okay,
Speaker 1: sixth pickout of seven.
Speaker 4: Yeah, but how do you downplay the metaverse when you've
Speaker 4: called your company Meta and you've spent thirty seven billion
Speaker 4: dollars minimum on it. You have to keep spending on it,
Speaker 4: You have to keep pushing forward unless you change your
Speaker 4: name back to Facebook.
Speaker 1: The fact is Facebook is sitting there with seventeen kajillion
Speaker 1: users worldwide looking at its products, it has Instagram, and
Speaker 1: the fact that the founder lives in a complete fantasy
Speaker 1: world probably doesn't matter all that much.
Speaker 3: Elane, do you do you have a higher estimation of
Speaker 3: Tesla that meta?
Speaker 4: Yes, that's not saying much.
Speaker 3: Is it semore? Same work?
Speaker 4: Well, the cars are good, the charging network is expanding.
Speaker 4: That's going very well. That means potentially, you know, another
Speaker 4: big source of revenue if it's opened out globally and
Speaker 4: lots of other car company needs use the charging stations
Speaker 4: and give money to Tesla model why sales are going
Speaker 4: quite well, but there are so many red flags. The
Speaker 4: big price cuts they've been using to lift sales that
Speaker 4: are just dragging on operating margins, and the idea that
Speaker 4: you're betting on people's willingness to buy big, expensive cars.
Speaker 4: And if there is any kind of uncertainty about the economy,
Speaker 4: that will go badly wrong. Where's the cyber truck? I
Speaker 4: don't know self drive modes auton of driving.
Speaker 3: Is the time where the windows broke during the stage demonstration.
Speaker 4: Yeah, that's the one. It looks cool, but it's nowhere
Speaker 4: all right.
Speaker 3: Thank you both for these picks. Elaine has Nvidia, Apple Alphabet,
Speaker 3: Rob has Microsoft, Amazon, meta and nobody picked Tesla, and
Speaker 3: people have been short Tesla a long time and the
Speaker 3: stock's proven a lot of doubters wrong. But maybe this
Speaker 3: time is different. We'll have to check back at the
Speaker 3: end of the year and see how our drafts did.
Speaker 1: I feel terrible about my picks now I'd.
Speaker 3: Like to take it off back.
Speaker 4: I feel great about mine. I'm looking forward to going
Speaker 4: back and Jimson about them.
Speaker 3: If Tesla is the best performing stock out of all
Speaker 3: of these, I think we will.
Speaker 1: We will eat an actual crow on the podcast. I
Speaker 1: don't know where you get a crow, but I assume
Speaker 1: you can order one from an It's just.
Speaker 3: The both of you crying well hacking away a crow.
Speaker 3: All right, We'll be back in a minute to talk
Speaker 3: about the stakes of our bet. Welcome back. This is
Speaker 3: normally the part of the show where we do a
Speaker 3: long and a short, but instead, for this special episode
Speaker 3: of on Hedge, we're discussing what the shame and the
Speaker 3: glory is going to be for the winner and the
Speaker 3: loser of this bet. Rob suggested eating a crow live
Speaker 3: on the podcast. I don't want to do that.
Speaker 1: That's that we only have to do that if if
Speaker 1: Tesla is the best performer the unpicked. Yes, member of
Speaker 1: the Magnificent seven is the best performer of the bunch.
Speaker 3: We do this star this annual stockpicking contest on the
Speaker 3: Unhedged newsletter, and you know we write either a maya
Speaker 3: culpa or a hey we got it right piece every year.
Speaker 3: Maybe we can do something like that.
Speaker 1: I'm always happy to write a MAPA is my is
Speaker 1: my strength, your bread and butter. I mean, should we
Speaker 1: put should we bet on it? Elaine?
Speaker 4: Sure?
Speaker 1: Dinner? A beer?
Speaker 4: I say beer? Well, uh yeah, A green.
Speaker 3: Juice, yes, no, an iced coffee.
Speaker 1: I hereby bet you the alcoholic beverage of your choice
Speaker 1: that my picks will prevail.
Speaker 3: She's going to take you to one of the Martini
Speaker 3: places you reviewed a couple months back, and it's going
Speaker 3: to be Martini.
Speaker 4: I don't know why I didn't say yes to dinner.
Speaker 4: And she's the most expensive place I can think of,
Speaker 4: because my bets are definitely going to do best in
Speaker 4: the os. But I'll take I'll take an expensive drink, okay.
Speaker 1: One expensive drink at the winner's choice of venue.
Speaker 3: Perfect rob Elaine will see you both back here in January.
Speaker 3: One person will be hanging their head in shame. One
Speaker 3: person will be pounding their chest in glory looking forward
Speaker 3: to that. All right, listeners will catch you next week
Speaker 3: for another episode of Unheedged see then. Unhedged is produced
Speaker 3: by Jake Harper and edited by Brian Erstadt. Our executive
Speaker 3: producer is Jacob Goldstein. We had additional help from toeprafoeheads.
Speaker 3: Cheryl Brumley is the FT's global head of Audio special
Speaker 3: thanks to Laura Clark, Alistair Mackie, John Schnarz, Eric Sandler,
Speaker 3: and Jess Trulia. FT Premium subscribers can get the Unheedged
Speaker 3: newsletter for free, and a ninety day free trial is
Speaker 3: available to everyone else. Just go to ft dot com
Speaker 3: slash Unhedged offer. I'm Ethan Woo. Thanks for listening.
Speaker 4: A