WEBVTT - Major Retail Collapse Could Lead to a Thrift Boom 0:00:02.240 --> 0:00:05.600 From the heart of where innovation, money and power collive 0:00:06.360 --> 0:00:10.879 in Silicon Valley and beyond. This is Bloomberg Technology with 0:00:10.960 --> 0:00:26.960 Emily Jay I'm Taylor Rigs in New York and Family Chain. 0:00:27.080 --> 0:00:29.880 This is Bloomberg Technology coming up in the next hour. 0:00:29.960 --> 0:00:32.800 It is a choppy day of trading, full of ups 0:00:32.840 --> 0:00:35.160 and downs. Yes, and p FID now having the worst 0:00:35.200 --> 0:00:39.680 two days since June. Plus of course the deal is 0:00:39.760 --> 0:00:42.400 on well, at least according to Twitter. We'll get the 0:00:42.479 --> 0:00:45.720 latest inside from inside Twitter, as the company says it 0:00:45.880 --> 0:00:48.440 is not backing down from that forty four billion dollar 0:00:48.520 --> 0:00:53.480 takeover from Elon Musk and its retail stocks slide over 0:00:53.560 --> 0:00:56.440 ongoing inflation fears. What does that mean for the second 0:00:56.440 --> 0:00:59.160 hand market. I'll be speaking about that with thread Up 0:00:59.240 --> 0:01:03.320 CEO g Speinehart, including why he expects the secondhand market 0:01:03.440 --> 0:01:06.240 to double in the coming years. We'll get to all 0:01:06.280 --> 0:01:07.920 of that in a moment, but first let's get a 0:01:07.959 --> 0:01:10.640 look at the markets with our very own lead Ludlow. 0:01:11.240 --> 0:01:13.959 In this place, I missed most. I left my heart 0:01:14.040 --> 0:01:17.600 in San Francisco. Wad I mean it's sunny, calm here 0:01:17.640 --> 0:01:20.960 in San Francisco. The market for some time during Thursday 0:01:21.040 --> 0:01:23.440 session looks sunny and calm as well. We call it 0:01:23.440 --> 0:01:26.119 a choppy day right of trading, or a see saw day, 0:01:26.360 --> 0:01:29.680 ultimately with down six tents of percent on the SMP 0:01:30.760 --> 0:01:32.840 half a percentage point four tents of percent on the 0:01:32.920 --> 0:01:36.039 Nasdaq one. But you contrast that with the declines we 0:01:36.080 --> 0:01:39.640 saw on Wednesday. Perhaps the market more sanguine but struggling 0:01:39.640 --> 0:01:42.640 for direction, and ultimately in the last hour or so 0:01:42.760 --> 0:01:45.440 of the session we fell away into negative territory. Also 0:01:45.480 --> 0:01:47.960 interesting to see yield softerter You see the US tenure 0:01:48.000 --> 0:01:51.680 at two point eight three percent, Bitcoin holding around thirty 0:01:51.680 --> 0:01:54.520 thousand dollars for token it had fallen, of course, in 0:01:54.520 --> 0:01:56.760 the set off we saw on Wednesday. This general risk 0:01:56.800 --> 0:01:59.480 off sentiment staying in place is that the FED is 0:01:59.520 --> 0:02:02.240 that inflation, Asian concerns will We also look at Cisco, 0:02:02.320 --> 0:02:06.800 because corporate earning season continue Cisco pretty steadily holding it 0:02:06.960 --> 0:02:10.600 declines of thirteen fourteen percent all throughout the session on Thursday, 0:02:11.400 --> 0:02:15.560 cutting its annual sales forecast, supply chain problems, impact from China, 0:02:15.639 --> 0:02:18.720 And we're so focused on Cisco because it's really a 0:02:18.760 --> 0:02:22.440 proxy or a barometer for corporate spending. When corporate America 0:02:22.520 --> 0:02:25.400 wants to invest in itself. Cisco tends to do well, 0:02:25.520 --> 0:02:28.800 so cutting its sales forecast. It's an interesting forward looking 0:02:28.840 --> 0:02:31.480 one after ours. We're also looking to apply materials Key 0:02:31.560 --> 0:02:34.800 chip maker of course lower a little lower, actually by 0:02:34.840 --> 0:02:36.720 around two and a half percent. It have been down 0:02:36.800 --> 0:02:38.520 as much as five and a half percent. A very 0:02:38.520 --> 0:02:41.440 similar story. It gave a tepid forecast for the current 0:02:41.560 --> 0:02:44.880 quarter and says the supply chain issues around semi conductors 0:02:44.919 --> 0:02:48.080 are still there. In some cases suppliers are running at 0:02:48.080 --> 0:02:50.720 fifty percent of capacity. Those are not the things we 0:02:50.760 --> 0:02:52.839 want to be hearing when we were also worrying about 0:02:52.880 --> 0:02:55.880 global growth and a recession. Very quickly tailored two big 0:02:55.880 --> 0:02:58.040 Bloomberg scoops on Thursday that I want to talk about 0:02:58.040 --> 0:02:59.880 and we will talk about later in the show for 0:03:00.040 --> 0:03:02.519 us of all Twitter higher you mentioned it. According to 0:03:02.639 --> 0:03:05.959 sources inside a meeting and all hands on Thursday, Twitter 0:03:06.000 --> 0:03:08.720 executives said he the deal with Elon Musque is not 0:03:08.840 --> 0:03:11.880 on hold. Be there's no such thing as a deal 0:03:11.919 --> 0:03:14.280 being on hold. Another big scoop, Apple actually one of 0:03:14.280 --> 0:03:16.679 the big laggards during Thursday session, down two and a 0:03:16.720 --> 0:03:19.840 half percent, but according to sources at a recent board meeting, 0:03:20.080 --> 0:03:23.720 Apple presented its latest virtual reality headset. You know what 0:03:23.760 --> 0:03:25.560 they look like, you know what I'm holding up, and 0:03:25.600 --> 0:03:27.519 that's a sign that it might be a new products 0:03:27.560 --> 0:03:29.920 on the horizon. We need more of those hand gestures 0:03:29.960 --> 0:03:32.760 from you add way to make it interactive. Really appreciate 0:03:32.800 --> 0:03:35.640 it very own at Lulow when is say, of course, 0:03:35.640 --> 0:03:39.000 on these volatile markets, and welcome in Jason Telber, portfolio 0:03:39.040 --> 0:03:42.120 manager for New Burger Berman and of course the disruptors 0:03:42.200 --> 0:03:45.320 E T F. Jason, what do you make quickly just 0:03:45.560 --> 0:03:48.640 sort of these volatile markets, particularly within your world of 0:03:48.680 --> 0:03:53.040 technology as well. Well. You know, it's interesting if if 0:03:53.040 --> 0:03:56.640 you look at tech overall, it's actually outperformed on a 0:03:56.680 --> 0:03:58.800 one year basis. We have to remember that tech was 0:03:58.920 --> 0:04:02.400 really really strong and back half last year, and particularly 0:04:02.800 --> 0:04:05.720 you know, Microsoft and Apple, which make up a large 0:04:05.760 --> 0:04:09.200 percentage of the Tech index. The first half of the 0:04:09.280 --> 0:04:12.480 year has been tougher. There's been some high profile disappointments, 0:04:12.520 --> 0:04:17.800 you know, Facebook, Meta, Amazon, Netflix, um. But I do 0:04:17.960 --> 0:04:22.080 think within our universe, within our universe of disruptive companies. 0:04:22.400 --> 0:04:24.919 It's been interesting because in the last two days of 0:04:25.000 --> 0:04:28.880 pretty significant down drafts in the market, we've seen significant 0:04:28.920 --> 0:04:33.440 outperformance UM, and we have to remember that smid cap 0:04:33.480 --> 0:04:36.800 Tech and smith Cap Growth specifically has been under a 0:04:36.800 --> 0:04:39.960 tremendous amount of pressure for the last twelve months, and 0:04:40.000 --> 0:04:42.560 we may be close to finding a bottom at least 0:04:42.560 --> 0:04:45.240 on a relative basis. Interesting, So when you talk about 0:04:45.240 --> 0:04:47.640 some of the smidcap technology companies, I think of a 0:04:47.640 --> 0:04:50.279 few headwinds. Rising rates, of course, sort of the classic 0:04:50.320 --> 0:04:53.160 headwind that we know with some of these long duration assets, 0:04:53.560 --> 0:04:56.040 and then smaller down the scale, maybe the less healthy 0:04:56.080 --> 0:04:58.440 the balance sheet. When you're thinking about the fundamentals and 0:04:58.720 --> 0:05:01.840 growth at any cost does didn't work anymore? How does 0:05:01.920 --> 0:05:05.400 that sort of impact the way you're looking at these companies. Absolutely, 0:05:05.440 --> 0:05:08.440 it's a great question, Taylor. You know, we've always been very, 0:05:08.560 --> 0:05:11.440 very focused on free cash flow. So even though we're 0:05:11.480 --> 0:05:15.080 interested in innovative, disruptive companies and you know a lot 0:05:15.120 --> 0:05:17.120 of their earnings could be out in the future, we 0:05:17.160 --> 0:05:19.560 also want to see free cash flow as soon as possible, 0:05:19.600 --> 0:05:21.799 and we want to own businesses there are in really 0:05:21.920 --> 0:05:25.159 strong strategic positions. So this isn't a fear of missing 0:05:25.160 --> 0:05:29.120 out portfolio UM. Within smitcap Growth, there's actually a lot 0:05:29.200 --> 0:05:32.560 of interesting names that have free cash flow support, So 0:05:32.800 --> 0:05:35.479 we're talking about two to four percent free cash flow 0:05:35.560 --> 0:05:41.280 yields companies like zoom Info and Zendesk. Within medical technologies, 0:05:41.279 --> 0:05:45.800 companies like dex Com, uh Intuitive Surgical, and I think 0:05:45.880 --> 0:05:49.279 that investors are starting to realize, hey, I've been paying 0:05:49.680 --> 0:05:52.760 you know, higher and higher multiples for consumer staples companies 0:05:52.760 --> 0:05:55.599 for safety, They're only really giving me a four percent 0:05:55.640 --> 0:05:59.479 free cash flow yield. And the reality is these costs 0:05:59.520 --> 0:06:03.320 are going to hit them disproportionately. So I think that's 0:06:03.320 --> 0:06:05.599 what we've been seeing the last two days, is that 0:06:06.040 --> 0:06:09.080 the real economy stocks are really going to be hurt 0:06:09.160 --> 0:06:12.920 by inflation. So there's too many investors hiding out there, 0:06:13.000 --> 0:06:15.280 and we may start to see a rotation to some 0:06:15.360 --> 0:06:19.400 of these you know, skinny balance sheets, high pricing power, 0:06:19.760 --> 0:06:24.280 high intellectual property businesses that exist in them in our 0:06:24.279 --> 0:06:29.240 disruptor's portfolio. Within that portfolio, how sort of defensive do 0:06:29.279 --> 0:06:31.880 you feel like you need to be and making sure 0:06:31.920 --> 0:06:34.720 that you're also cash on the sidelines for better opportunities. 0:06:34.720 --> 0:06:38.080 But cash, of course, after inflation, is a money loser. 0:06:39.279 --> 0:06:43.920 Yeah that, I mean, great question. I wouldn't say that. Um, 0:06:43.960 --> 0:06:45.400 you know, I don't want to make a call on 0:06:45.440 --> 0:06:50.000 the market. Do have concerns of how is this inflation 0:06:50.040 --> 0:06:52.800 going to kind of filter through our economy and particularly 0:06:52.880 --> 0:06:56.080 hit consumer spending over time. We're obviously already beginning to 0:06:56.120 --> 0:06:59.240 see that um show up pretty brightly in in you know, 0:06:59.360 --> 0:07:03.919 raw Store, some Walmart and Target, etcetera. UM So, I 0:07:03.960 --> 0:07:07.400 would say our portfolio is definitely tilted in the in 0:07:07.839 --> 0:07:10.400 the in the health care sector, so we do want 0:07:10.400 --> 0:07:13.320 to be a little defensive from that standpoint. But even 0:07:13.400 --> 0:07:16.680 those names, if they're high growth, they are down a 0:07:16.760 --> 0:07:20.160 lot from where they were, you know, nine twelve months ago, 0:07:20.680 --> 0:07:23.280 And as I was saying earlier, they're starting to kind 0:07:23.280 --> 0:07:26.920 of bump up against pretty interesting valuations where you can 0:07:26.920 --> 0:07:30.520 get you know, to three percent free cashual yields for 0:07:30.560 --> 0:07:34.640 a company that's growing the top line A And if, 0:07:34.680 --> 0:07:38.239 if you know, we enter into a kind of stagflationary 0:07:38.360 --> 0:07:41.840 environment and and real growth becomes elusive, I do think 0:07:41.840 --> 0:07:44.360 investors are going to come back to companies like this. 0:07:45.640 --> 0:07:49.120 Interesting though, I was speaking with Annestesia amorros So earlier 0:07:49.160 --> 0:07:53.640 by Capital and she said, maybe not always looking at 0:07:53.720 --> 0:07:57.600 valuations is the best way when you're thinking about investing. 0:07:58.680 --> 0:08:02.040 How much. Are you really keen valuations versus then just 0:08:02.120 --> 0:08:04.200 some of the other big technicals and just sort of 0:08:04.240 --> 0:08:08.960 the mass selloffs and indiscriminate selling where valuations look good 0:08:08.960 --> 0:08:13.280 but the market frankly doesn't seem to care. Yeah. I 0:08:13.320 --> 0:08:17.000 think ultimately, you know, as they say that, you know, 0:08:17.040 --> 0:08:21.119 the short term markets canting machine machine, long term waing machine, 0:08:21.400 --> 0:08:24.560 and ultimately valuation is going to matter. You know, one 0:08:24.600 --> 0:08:28.000 of our companies in the portfolio that I mentioned, zendesk Um, 0:08:28.040 --> 0:08:30.720 you know, has private equity interests that's been kind of 0:08:30.720 --> 0:08:34.280 broadly reported. I think you could start to see start 0:08:34.360 --> 0:08:36.280 start to see more of that in the kind of 0:08:36.320 --> 0:08:41.360 disrupted in innovation uh space. So I think we have 0:08:41.520 --> 0:08:46.400 to stay focused on valuation and owning good businesses that 0:08:46.440 --> 0:08:49.800 are disruptive. Sounding like a good see a fach hardholder 0:08:49.960 --> 0:08:53.520 that he is focused on those valuations. I remember as well, 0:08:53.559 --> 0:08:57.520 and I'm understanding of course what that means. I think 0:08:57.520 --> 0:09:00.720 when we talk about the bubbles and some of the 0:09:00.800 --> 0:09:03.920 hysteria in this market, it really was SPACs as well. 0:09:03.960 --> 0:09:06.520 You know, we understand the disclosures. When you think about 0:09:06.520 --> 0:09:09.040 an I p O wanting to raise capital, was the 0:09:09.120 --> 0:09:12.400 snack spack market. One of the first indications of a 0:09:12.480 --> 0:09:14.880 little frothy, a little bit over our skis here when 0:09:14.920 --> 0:09:18.080 we were taking a look at that peak market bubbles. Oh, 0:09:18.160 --> 0:09:21.360 I mean, I mean, if we look back on this, 0:09:22.280 --> 0:09:25.959 I think that what happened is during the pandemic UM, 0:09:26.000 --> 0:09:29.560 it was really these innovative growth companies that had massive 0:09:30.240 --> 0:09:33.000 estimate revisions because they were kind of leading us through 0:09:33.080 --> 0:09:38.600 the pandemic. You know, think companies like Zoom, Moderna, bioin Tech, etcetera. 0:09:38.720 --> 0:09:42.880 And this just generated a halo on all things innovative 0:09:43.040 --> 0:09:46.080 and growth. And there's going to be a massive acceleration 0:09:46.200 --> 0:09:50.240 even once the pandemic is over. UM and and and 0:09:50.280 --> 0:09:53.000 I think that there there's a lot of herds you know, 0:09:53.080 --> 0:09:56.000 heard following that goes on in the market. And I 0:09:56.040 --> 0:10:00.679 think the equity markets are friendly investment banks UH responded 0:10:00.760 --> 0:10:05.920 by by taking anything public UM that was remotely innovative. 0:10:06.040 --> 0:10:08.280 A lot of these companies went public way too early. 0:10:08.840 --> 0:10:11.559 UM And Frankly, when we look at the fact that 0:10:11.720 --> 0:10:14.760 you know, small cap growth underperformed large cap growth by 0:10:14.800 --> 0:10:18.760 twenty five percentage points last year the most. And I 0:10:18.800 --> 0:10:21.200 think a big part of that is just all the 0:10:21.280 --> 0:10:26.239 supply that was pushed into the market. Um and and interestingly, 0:10:26.280 --> 0:10:29.679 if we look at where investors, so households have been 0:10:29.679 --> 0:10:33.280 putting money, they've generally been putting it into large cap funds. Right, 0:10:33.280 --> 0:10:36.520 So you had this mismatch of supply and demand, and 0:10:36.559 --> 0:10:39.000 that's one of the reasons why I think, you know, 0:10:39.160 --> 0:10:42.640 kind of the megacps kind of lead in the back 0:10:42.679 --> 0:10:46.000 half of one while some of these you know, this 0:10:46.160 --> 0:10:50.520 MidCap space was being decimated quickly. Yeah, no, quickly here, 0:10:50.559 --> 0:10:52.760 we only have about a minute left, Chase and Curs 0:10:52.800 --> 0:10:55.600 gets your thoughts on if this is a U S story. 0:10:55.679 --> 0:10:59.079 We've heard a lot of calls that China tech, for example, uninvestable. 0:10:59.559 --> 0:11:02.680 Are you us only focus here within these volatile markets, 0:11:03.559 --> 0:11:07.199 within the our Disruptors E t F, we only focus 0:11:07.360 --> 0:11:10.280 or we only owned US listed companies we own like 0:11:10.440 --> 0:11:14.080 one A d R. I think we own no Chinese stocks. 0:11:14.800 --> 0:11:18.079 Really appreciate it, Jason Topper Newberger Berman Disruptors E t 0:11:18.240 --> 0:11:21.480 F portfolio manager, really keeping us up to date on 0:11:21.520 --> 0:11:32.760 all things big tech and these volatile markets. Investors are 0:11:32.880 --> 0:11:35.559 finding shelter from the deepending bear market sell off in 0:11:35.559 --> 0:11:37.720 the cheapest corners of the U S tech sector and 0:11:37.800 --> 0:11:41.640 really pulling back significantly significantly from some of the software 0:11:41.679 --> 0:11:45.160 stocks joining us now Rishie Jewelry f software analysts at 0:11:45.280 --> 0:11:49.400 RBC Capital Markets. And it's another sort of big day 0:11:49.400 --> 0:11:52.800 when we think about valuations and re rating of some 0:11:52.920 --> 0:11:54.679 of the big high flyers, a lot of the high 0:11:54.720 --> 0:11:57.559 flyers during the pandemic as well. To kick us off 0:11:57.559 --> 0:12:02.480 broadly speaking, how are you looking at valuations at this moment? Yeah, 0:12:02.520 --> 0:12:04.079 and thank you so much for having me. Look, I 0:12:04.360 --> 0:12:07.080 think we increasingly have to you know, get away from 0:12:07.120 --> 0:12:10.160 the fraud that we were experienced, uh experiencing for the 0:12:10.160 --> 0:12:13.320 past two years during the pandemic and and drill more 0:12:13.440 --> 0:12:17.240 on on free cash flow and profitability and to that extent, 0:12:17.280 --> 0:12:20.079 I mean, we're seeing some really attractive opportunities out there. 0:12:20.120 --> 0:12:22.840 You know, we see some really high quality companies like 0:12:22.960 --> 0:12:25.840 Zoom infol trading at thirty times cash flow, and and 0:12:25.880 --> 0:12:28.000 even some of the pandemic darlings that you know, they're 0:12:28.000 --> 0:12:30.520 going through some struggles, but we see you know, Zoom 0:12:30.520 --> 0:12:33.280 trading at fifteen times free cash flow. Uh. You know, 0:12:33.320 --> 0:12:35.600 we see Viva, very high quality company trading at twenty 0:12:35.679 --> 0:12:38.200 five times free cash flow. Um. We really like these 0:12:38.240 --> 0:12:40.160 sort of names and and and think the fact that 0:12:40.200 --> 0:12:43.920 there's actual valuation support on a profitability basis, uh and 0:12:43.920 --> 0:12:45.440 and these are names that we think can can do 0:12:45.520 --> 0:12:48.120 well in any sort of environment and still have a 0:12:48.120 --> 0:12:50.959 long run way of growth. Um. We are increasingly, though, 0:12:51.000 --> 0:12:53.120 looking at profitability way more than we used to do 0:12:53.200 --> 0:12:56.000 a year ago. And you're spot on. And I'm chuckling 0:12:56.040 --> 0:12:57.920 a little bit because the previous guests and you are 0:12:57.960 --> 0:13:00.760 mentioning on a instead of forward pe we're looking at 0:13:01.280 --> 0:13:03.679 multiples that include cash flow. And I'm wondering because when 0:13:03.679 --> 0:13:06.000 the E is negative, the math doesn't really work. Is 0:13:06.040 --> 0:13:08.800 you need a positive number in the denominator? How much 0:13:08.800 --> 0:13:11.560 of a focus is that e positive earnings instead of 0:13:11.559 --> 0:13:15.360 negative earnings? Yeah. Look with with SaaS companies, I think 0:13:15.400 --> 0:13:17.400 free cash flow matters a lot because it's just the 0:13:17.480 --> 0:13:21.560 dynamics of how revenue recognition works. Right, there's subscription businesses, 0:13:21.840 --> 0:13:24.000 and so you have to look at free cash flow 0:13:24.400 --> 0:13:26.960 rather than earnings. I mean you obviously still have you know, 0:13:27.120 --> 0:13:30.320 high quality businesses that you can value on earnings. Microsoft, 0:13:30.320 --> 0:13:33.840 for example, trading at twenty times forward earnings and that's 0:13:33.880 --> 0:13:36.440 gap earnings at that um. You know, so so you 0:13:36.440 --> 0:13:38.680 you would definitely have businesses where you can look at earnings. 0:13:38.679 --> 0:13:41.079 But the reason we always look at cash flow is 0:13:41.160 --> 0:13:43.080 number one, it's a it's a metric that is really 0:13:43.080 --> 0:13:46.280 hard to manipulate like earnings. And number two because of 0:13:46.320 --> 0:13:49.120 that whole subscription dynamic I just mentioned. What do you 0:13:49.160 --> 0:13:51.120 make of the big sell off looking at your coverage 0:13:51.160 --> 0:13:55.800 list Salesforce Microsoft? You know you think Microsoft massive, strong 0:13:55.880 --> 0:13:59.120 balance sheet, huge free cash flow, as you mentioned, strong 0:13:59.240 --> 0:14:03.520 debt rating. The indiscriminate selling that's been going on in 0:14:03.520 --> 0:14:05.680 the market, what is that telling you about the future 0:14:05.679 --> 0:14:10.360 path forward for even these super strong, healthy companies. Yeah, 0:14:10.400 --> 0:14:11.800 I look at I think you hit it on the head. 0:14:11.800 --> 0:14:14.600 It'sn't It is indiscriminated selling. And I think what is 0:14:14.640 --> 0:14:17.800 happening is investors are just fearful, right and and and 0:14:17.800 --> 0:14:20.920 and it's more the uncertainty that's killing everything. Um. You know, 0:14:20.960 --> 0:14:24.080 if we were actually in a recession right now, I 0:14:24.080 --> 0:14:26.720 think there's been a lot lesson certainty, But it's the unknown, 0:14:26.760 --> 0:14:28.800 as you know, are are we heading into recession? Are 0:14:28.800 --> 0:14:30.840 we not? Is it going to be like oh eight? Um? 0:14:30.920 --> 0:14:33.080 And I think that's what's making investors just sell off 0:14:33.120 --> 0:14:35.240 everything software, along with the fact that you know, all 0:14:35.280 --> 0:14:37.840 these stocks benefited during the pandemic um and I think 0:14:37.880 --> 0:14:40.480 it's time for investors to take a look and say, look, 0:14:40.560 --> 0:14:43.680 let's separate. You know, really, what are quality businesses from 0:14:43.720 --> 0:14:46.200 those that that aren't. And you know, where have investors 0:14:46.240 --> 0:14:49.360 been throwing out the baby with the bathwater? Um? So 0:14:49.400 --> 0:14:51.040 that's what I really think is happening here. But I 0:14:51.080 --> 0:14:54.560 think it is creating some opportunity. What are those opportunities then? 0:14:54.640 --> 0:14:56.800 For you? Within your coverage list? How are you thinking 0:14:56.840 --> 0:15:01.120 about the strong companies going forward? Uh? Yeah, Look, we're 0:15:01.160 --> 0:15:04.080 we're we're bullish on you know Microsoft, right for example, 0:15:04.080 --> 0:15:06.640 you know, it's pulled back off the highs and trades 0:15:06.680 --> 0:15:09.240 of a very reasonable valuation. Uh and and it's one 0:15:09.240 --> 0:15:11.840 of those names that should do well in a even 0:15:11.840 --> 0:15:14.480 in a downturn. Right. Viva is another name we like, 0:15:14.640 --> 0:15:16.720 you know, and in fact, they sell to healthcare, which 0:15:16.760 --> 0:15:20.200 is itself a very defensive sector. Um HubSpot is another 0:15:20.280 --> 0:15:22.800 name that we're taking advantage of on the pullback. Right. 0:15:22.840 --> 0:15:25.640 These are all companies that that have profitability that you 0:15:25.640 --> 0:15:28.960 can value on cash flow, have multiple growth drivers to 0:15:29.040 --> 0:15:31.600 to to continue growing, and and you know names again, 0:15:31.720 --> 0:15:34.920 especially Microsoft and Viva should hold up really well even 0:15:34.920 --> 0:15:37.040 in the event of a recession. What about some of 0:15:37.040 --> 0:15:40.840 the big pandemic winners that you mentioned, Palanteer, Zoom, the 0:15:41.160 --> 0:15:43.920 video conference company that we know, docu Side, we no 0:15:44.000 --> 0:15:47.040 longer were able to sign in persons were doing docu sign. 0:15:47.720 --> 0:15:50.400 Was that just a pull forward revenue that we saw. 0:15:50.920 --> 0:15:54.320 How consistent do you see that revenue and of course 0:15:54.360 --> 0:15:58.480 cash flow going forward? Yeah? Absolutely, And and you know, 0:15:58.640 --> 0:16:01.440 i'll put Palanteer side because we're actually a negative on 0:16:01.520 --> 0:16:04.440 that name. But but on on Zoom and docu Sign, 0:16:04.680 --> 0:16:07.240 I think you're you're absol right. They did pull forward 0:16:07.240 --> 0:16:09.720 a lot of business and and they're both very focused 0:16:09.760 --> 0:16:12.200 on their second act. Right. For for Zoom it's Zoom 0:16:12.240 --> 0:16:15.240 Phone and some of the other adjacencies like rooms and 0:16:15.480 --> 0:16:19.680 events UM. For for docu sign, it's it's CLM, Contract 0:16:19.680 --> 0:16:22.440 Lifecycle Management UM. Their focused on their second act. And 0:16:22.480 --> 0:16:24.920 I think the again, the uncertainty is what's holding these 0:16:25.000 --> 0:16:27.120 names back, right, It's why Zoom trades at fifteen times 0:16:27.160 --> 0:16:30.080 cash flow for what I think is a very quality 0:16:30.160 --> 0:16:33.240 business that that has you know, good unit economics and 0:16:33.240 --> 0:16:35.840 and really great technology. I think it's the best video 0:16:35.840 --> 0:16:38.960 conferencing technology that exists out there, but all the uncertainty 0:16:39.040 --> 0:16:40.840 is okay, well, how many other people are left in 0:16:40.880 --> 0:16:44.200 the world to do video conferencing Once you displace WebEx Uh, 0:16:44.280 --> 0:16:46.360 then where is there to go? And so as as 0:16:46.360 --> 0:16:49.160 they can prove that these second and third acts of 0:16:49.200 --> 0:16:51.920 their business are are for real, uh, then I think 0:16:51.960 --> 0:16:54.080 we can start to see a rerating on those docks. 0:16:54.120 --> 0:16:57.359 The argument has always been companies, even in a recession, 0:16:57.480 --> 0:17:01.360 even in a pullback, will continue to invest in technology. 0:17:01.640 --> 0:17:03.520 You've mentioned some of the companies that you really see 0:17:03.520 --> 0:17:08.480 as a recession proof effectively what companies don't do well 0:17:08.520 --> 0:17:12.520 in some of those slow down environments. Yeah. Look, I 0:17:12.520 --> 0:17:14.639 think there's a couple of categories. Number one is going 0:17:14.680 --> 0:17:17.399 to be any piece of software that is a a 0:17:17.600 --> 0:17:20.000 nice to have, not a need to have, right. Um 0:17:20.040 --> 0:17:22.159 you know, look, I think you can find plenty of 0:17:22.200 --> 0:17:25.080 categories of software that there's are more discretionary nature that 0:17:25.400 --> 0:17:27.280 if you know, push comes to shove and you have 0:17:27.320 --> 0:17:30.200 to unplug them. Um, it's okay, but you can't unplug 0:17:30.240 --> 0:17:32.800 your e RP, you cannot unplug your CRM, you can't 0:17:32.840 --> 0:17:35.879 move your workloads off as youre um so so you know, 0:17:35.920 --> 0:17:39.080 it's the discretionary items that we think are gonna do poorly. 0:17:39.359 --> 0:17:42.000 And then it's it's companies that are really levered to 0:17:42.400 --> 0:17:44.880 you know, the VC back businesses, right. I mean, it's 0:17:44.920 --> 0:17:47.320 no secret out there. We're seeing a lot of VC 0:17:47.520 --> 0:17:49.480 you know, funding dry up. We're seeing you know, those 0:17:49.480 --> 0:17:52.919 companies have to focus on profitability or even seeing layoffs right. 0:17:52.960 --> 0:17:56.200 And in consumer tech and even some VC backed enterprise 0:17:56.680 --> 0:17:59.720 software companies uh and and and any software company that 0:17:59.800 --> 0:18:02.679 is is proportionately exposed to the low end of the 0:18:02.760 --> 0:18:05.520 market um and to this kind of froth the VC 0:18:06.280 --> 0:18:08.920 back businesses, we think those ones are definitely at risk 0:18:08.960 --> 0:18:12.480 in the downturn. Really appreciate it so smart for cash flow, 0:18:12.520 --> 0:18:17.640 That's my takeaway. Bristi Gelirias, software analyst at OURBC Capital Markets, 0:18:17.640 --> 0:18:21.200 coming up, Twitter executives toning down some of the tweets 0:18:21.200 --> 0:18:24.080 and reassuring employees that the deal with Musk is on 0:18:24.720 --> 0:18:27.879 and not on hold. We're going to discuss the latest 0:18:27.880 --> 0:18:43.879 this Bloomberg time now for a Bloomberg scoop. The Twitter 0:18:43.960 --> 0:18:47.440 takeover drama continues as executives telling employees that the deal 0:18:47.480 --> 0:18:50.080 with Elon Musk it is not on hold, and it 0:18:50.280 --> 0:18:53.280 is moving forward as planned with the agreed upon price. 0:18:53.600 --> 0:18:56.320 Joining us once again is a very own Bloomberg's at 0:18:56.400 --> 0:18:58.560 Ludlow ned I wanted to say her just discuss our 0:18:59.480 --> 0:19:02.439 twins is wedding planning, and the producer said, no, we 0:19:02.480 --> 0:19:04.520 have to do Twitter. We have to do the story 0:19:04.560 --> 0:19:06.919 of the day. Right. Well, there's a lot to talk about. 0:19:07.000 --> 0:19:09.479 So we're hearing from sources that are in this big meeting, 0:19:09.560 --> 0:19:13.720 this big old hands that Vigor Gadda, who's the head lawyer, 0:19:13.800 --> 0:19:16.359 head of policy at Twitter, basically stood up and said, 0:19:16.760 --> 0:19:19.840 you know, not only is the deal with Elon Musk 0:19:20.040 --> 0:19:23.080 not on hold, but there's no such thing as a 0:19:23.160 --> 0:19:26.720 deal being put on hold, literally a quote from within 0:19:26.800 --> 0:19:29.359 that meeting. And you know this has been an area 0:19:29.359 --> 0:19:31.960 of intent interests not just for investors or US in 0:19:32.000 --> 0:19:35.480 the media, but Twitter users, fans of Elon Musk. And 0:19:35.560 --> 0:19:37.560 you know this was a move by company executive to 0:19:37.640 --> 0:19:40.720 reassure Twitter employees that you know, this is going to 0:19:40.800 --> 0:19:43.680 go ahead and this is what they're working toward. Why 0:19:43.800 --> 0:19:47.800 they need to even address this, right, Let's go back 0:19:47.800 --> 0:19:50.680 to basics. Great question. You'll remember that Elon Musk tweeted 0:19:51.040 --> 0:19:55.199 several days ago that the deal was quote temporarily on 0:19:55.280 --> 0:19:59.080 hold because he felt that data Twitter had provided in 0:19:59.080 --> 0:20:02.560 a regulatory fire ng saying less than five percent of 0:20:02.640 --> 0:20:05.439 users on the platform were bots was not accurate. He 0:20:05.560 --> 0:20:08.320 felt that he didn't believe the data and evidence that 0:20:08.320 --> 0:20:10.760 Twitter had provided, and he wanted to know more, and 0:20:10.840 --> 0:20:14.040 he stated on Twitter, in classic Elon Musk fashion, that 0:20:14.160 --> 0:20:18.160 until he had more evidence, the deal was temporarily on hold. Quote. 0:20:18.200 --> 0:20:21.800 But remember Bloomberg reporting as well that according to sources 0:20:22.359 --> 0:20:25.800 in the background, whatever Elon Musk is saying, his advisers, 0:20:25.880 --> 0:20:28.760 his bankers were getting on with it, you know, working 0:20:28.800 --> 0:20:31.400 with the other side, working with Twitter to get this 0:20:31.440 --> 0:20:33.639 deal to happen at the original price, which will remind 0:20:33.640 --> 0:20:37.920 our audience twenty cents per share to take Twitter private 0:20:37.920 --> 0:20:41.600 and evaluation forty four billion dollars. A lot of drama 0:20:41.800 --> 0:20:44.320 continuing to play out, and know that you continue to 0:20:44.400 --> 0:20:46.480 keep us up to date here on Twitter. I want 0:20:46.480 --> 0:20:48.520 to go to potentially a little bit more of a 0:20:48.600 --> 0:20:51.639 stable growth company here, and that's Apple. We had a great, 0:20:51.760 --> 0:20:54.120 of course story out here from our very and Mark 0:20:54.240 --> 0:20:56.600 Roman talking about the headset. I know that you love 0:20:56.640 --> 0:20:59.800 to do that hand motion and really described that headset 0:20:59.800 --> 0:21:02.639 for as visually here, but showing it to the board 0:21:02.920 --> 0:21:06.840 a significant sign of progress. Right, we're talking about a 0:21:06.960 --> 0:21:10.440 virtual augmented reality headset. You know, I don't have a prop, 0:21:10.480 --> 0:21:13.720 but basically sources saying that the latest version of this 0:21:13.960 --> 0:21:16.520 device was presented to the board recently. The board meets 0:21:16.520 --> 0:21:18.680 four times a year, but that's a pretty good sign 0:21:18.760 --> 0:21:21.840 that it's at a stage where it could be real. 0:21:21.920 --> 0:21:23.560 It could be the next big thing. You look there 0:21:23.560 --> 0:21:27.439 at that pie chart. Hardware so important for Apple revenue, 0:21:27.440 --> 0:21:30.639 but the iPhone dominates. What's the next generation of products? 0:21:30.680 --> 0:21:34.439 How can they boost services revenue? Were augmented virtual reality 0:21:34.720 --> 0:21:36.800 is one way of doing that. And so you know, 0:21:36.840 --> 0:21:40.280 we're hearing that this headset has amazing processing power, the 0:21:40.320 --> 0:21:43.879