The webinar was recorded November 18, 2021.
You can find the slides here.
Chris Preston [00:00:04] Hello and welcome to today’s Cabot Wealth webinar, The Next Big Technology Revolutions and How to Profit from Them. I’m your host, Chris Preston, Chief Analyst of the Cabot Wealth Daily Advisory and Vice President of Content here at Cabot Wealth Network. With me today is Tyler Laundon, Chief Analyst of our Cabot Small-Cap Confidential and Cabot Early Opportunities advisories. Today, Tyler is here to talk about what’s next in the world of technology. What major technology, technological innovations and trends will drive the market in the coming years and which stocks are most likely to profit from those changes. This is an interactive webinar, which means we’ll be fielding your questions after Tyler’s presentation concludes. So if you have a question, feel free to ask it at any time, and we will try to get to as many of them as time allows once Tyler wraps up. Just keep in mind that we cannot offer advice in regards to your own personal investing situation or portfolio.
Chris Preston [00:00:58] First, let me introduce Tyler. Tyler is Chief Analyst of the limited subscription advisory Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing startup in small cap companies. His hands on experience has taught Tyler that the development of superior business model is the biggest factor in determining a company’s long term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends and addressable markets, and achievement of major developmental milestones. Tyler small cap portfolios favor a high allocation to stable, high growth companies upon which he layers strategic purchases of higher risk, event driven investments. He first began publishing his analysis of small cap opportunities in 2009. Since 2012, his latest subscribers into 10 doubles. Both his Advisories, his current advisories boast average returns of better than 100 percent. Prior to joining Cabot, Tyler founded and operated a small business for 15 years. He then worked as a consultant for startup technology companies, as well as Vermont’s largest health care institution, and from 2009 to 2015 he was Chief Analyst of growth stocks and wide investment research, where his research spanned the full spectrum of the growth stock universe, from micro-cap start ups to multinational mega caps. Taylor holds a B.S. and MBA from the University of Vermont, where he graduated valedictorian. He’s been a long time contributor to the Wall Street’s Best Investments, has been quoted by U.S. News and World Report, and has presented investing ideas and strategies for the Money Show and Bloomberg Markets Live Insights. Bottom line Taylor knows how to spot a trend and identify which early stage stocks will benefit from those trends. That’s exactly what he’ll do today. Tyler, take it away.
Tyler Laundon [00:02:55] OK. Thanks, Chris. All right, guys, so yeah, we’re going to jump right in and talk about how the pace of technology innovation is increasing, and we’re going to get into implications across market cap sizes, different sized companies. And we’re going to talk a little bit about markets where we’re seeing rapid innovation and the trends that we’re investing in and that we want to continue to invest in both through Cabot Small-Cap Confidential and Cabot Early Opportunities. And of course, we’re going to weave some stocks in as ways to play those trends. And as Chris said, please, if you have any questions, just jot them down throughout this, it’ll be a lot more interesting for me, for sure toward the end, if we have a back and forth dialog, especially after I talk for the next 25 or 30 minutes.
Tyler Laundon [00:03:43] So a lot of what we’re going to talk today is really about kind of high level stuff, just a way of thinking as we move forward over the next five, 10 years. Really, just thinking about this concept of how the pace of technology innovation is increasing. And if you blink right now, it really does feel like you just kind of missed something. We’re seeing that, you know, businesses, consumers, governments, behavior is evolving rapidly across the world. And behind that is this idea that this reality that technology adoption is not linear, but exponential. So if we think back in history and I’m going to put up a model of this on the next slide, kind of put some imagery around it. This isn’t all my research. I’m definitely building on stuff that is out there. But think about trends in, you know, like decades ago. So like flush toilets, fridges, landline telephones, you know, think about the adoption curves on those like big picture. It took some time. Then we move on to microwaves, flat TVs, computers, quicker, more people adopt them sooner, that kind of thing. And we move into the internet, mobile phone and social media much more quickly with these digital technologies, adoption curves and again spreading out to more areas of the globe much more quickly. Now we’re thinking about this next wave - machine learning, artificial intelligence and big data analysis. These technologies, which are we’re in this wave where we’re innovating not only more quickly, but the technologies are being used to innovate themselves more quickly. And so it’s really just this exponential growth in terms of the rate of innovation. And that’s kind of the concept behind a lot of what we’re going to talk about. And it has implications for all kinds of markets from, you know, supply chain finance, social media, software, crypto economy and then, of course, clean tech and electric vehicles and pretty much, you know, all industries. So this is the graphic I reference, this was from is from a great website, visual capitalist, which puts up imagery that’s supported by the content providers, but they really do a nice job and what this shows is on the left, these long waves of innovation, this concept that was put forth by economist Joseph Schumpeter in nineteen forty two. And just again, if you look at this at high level, you just see these kind of long, drawn out waves first wave, second wave, third wave. As we move through time, they get shorter and shorter as we move on to different innovation cycles. And as we get into the fourth wave, it’s shorter. Then we get into that fifth wave, which is, you know, 30 years where we’re talking about the internet software, things like that. And that moves relatively quickly. And now we’re on into the sixth wave quite in this model, which I think makes a lot of sense conceptually where we have these technologies, like I said, machine learning, artificial intelligence, clean tech, robotics, automation, that kind of thing. So again, the big picture thinking here is it what we think may happen way off in the future will actually happen sooner than we think. And in some ways, it happened so quickly that, you know, over two or three year time frame, it kind of sneaks up on you and then all of a sudden something different and you don’t really notice it. It happened while you weren’t really paying attention. I’ll give some examples of that.
Tyler Laundon [00:07:03] So implications for investment across market caps and I say across market caps because we obviously are looking at the mega-cap companies like Microsoft, Amazon, but also a lot of what I do with looking at the small and mid-cap companies. And so we really want our theoretical view of how this is all happening to be able to span across all these different companies to different sizes because there are different ways of thinking about them, depending on size. So but as we think about the market in general, it’s certainly been the case that a smaller proportion of stocks have powered the market higher in recent decades. If we look at data from the Bank of America 1990 to mid 2020, just one point five percent of companies drove the market’s $56 billion in wealth creation. That is a tiny sliver of companies making up a huge amount of the upside move in the stock market, and that pace is accelerating. So from 2016 to 2019, just five companies accounted for 22 percent of net wealth concentration. We’ll talk about those companies in a second, but again, big picture. The pace of share price gains for some of these stocks is really pretty mindboggling. Investors, you know, we can certainly own the market, of course, and that’s been a good thing to do because it’s done quite well. But if you don’t want to do that or if you want to do individual stocks, which is what we are here at Cabot to help you do. And clearly, stock selection and management of your portfolio is critical and there are different lessons, as I said, as we move up and down the market cap curve.
Tyler Laundon [00:08:40] So just talking about the trillion and billion dollar valuation clubs, because these are clearly what has driven the market, there is there’s a few insights to this slide and obviously what I have here are tickers, market caps and how long those companies have been in existence. But the idea here is if you look at the top companies in the market, those that are really responsible for driving the majority of the gains, you see Microsoft, Apple, Amazon, Google, Tesla, Facebook, companies like that - trillion dollar market caps or more. What’s interesting to me about these companies is Microsoft and Apple existed pre-internet. They were out there. They existed. They were able to adapt through that next innovation wave and became leaders throughout and continue to be leaders now. They’ve been around for forty five, forty six years. We look at Amazon and Google, who kind of came into being during that wave. Twenty seven, twenty three years old and did obviously very well. Also, Tesla and Facebook came in a little bit later. We compared those companies to earlier and older companies that maybe didn’t have such a strong digital strategy. Obviously different, you know, business models for Berkshire Hathaway, for ExxonMobil. But we have IBM in here, which is easy to pick on because it’s underperformed so badly for the last decade, 110 year old company that now has one hundred and six billion dollarmarket cap. It’s really dwarfed in comparison to some of these other companies. They’ve just leapfrogged it and really, you know, left IBM in the dust. And so there’s some there’s some lessons to be learned there about, I think IBM’s failure to adapt through that innovation wave. Easy to say in hindsight, but always want to try to learn from those examples and think about the future as we slide over to the right hand side. All these companies in red the point here is just look at how long a lot of these companies have been around - for a decade, give or take a few years with really, really large market caps for how old the companies are. Even at the bottom, Datadog 60 billion market cap has been around for 11 years. Cloudflare that’s the ticker symbol NET, fifty four billion, twelve years. Move on up, DoorDash, Eighty three billion for eight years. Sea Global, SE, one hundred and eighty eight billion. It’s been around for only 11 years. Then, of course, Airbnb and Snow, both low 100 billion market cap area been around nine to 13 years. So it’s just again, this goes to this concept of how these companies that have latched on and innovated through these most recent innovation waves have been able to scale up and grow so much more quickly than anything, you know, we saw really before.
Tyler Laundon [00:11:32] So some of the keys to success, we want to learn from these companies that have succeeded when we’re thinking about technology, and this is pretty basic stuff, but it helps me ground my research when I’m looking at smaller companies and I’m kind of evaluating them through time and what moves management is making. But clearly, we want companies that are going to prioritize innovation and be willing to evolve through time. We want companies to gain customers and be able to retain them - pretty basic. We want them to be able to introduce new, scalable products. We want them to acquire talent and be able to retain that talent because that feeds directly into their ability to innovate, of course. And then this next item, this next line -investor support and financing, I think that’s playing a larger and larger role now than it really ever has in the past. Because as companies see their share prices bid up, they can use their share price as currency, either for secondary offerings or to acquire other companies or talent that can help add value to the company. And I think that the role that investors are playing within publicly traded companies is getting larger and larger, and we see that in subtle ways. So like. Airbnb, for instance, when they went public, they offered stock at the IPO price to Airbnb hosts. So we see a little bit more of a symbiotic relationship between a company and their shareholder base starting to take form where they kind of win together. Some interesting dynamics there, I think. Of course, the company has to be able to work in the regulatory environment. Think about things like EVs right now. And then finally, economic viability the business model has to work. Obviously, the company has to make money at some point in time. Very important.
Tyler Laundon [00:13:29] So these types of keys to success, like I said, are really important as we look especially at small and mid-cap companies. Whereas a lot of the work that I do is focused because they are the challengers and because there are hurdles at various stages of growth where you know, they may have a great product that gets them from - help gets their company from a market cap of, say, two billion to six billion, then we have to be looking at, OK, like, what’s the next step for this company? Is it going to kind of, you know, slow down here or they’re going to be able to take the next step and get to that eight, 10 billion market cap area or then 20 billion and whatnot. So there’s different hurdles depending on how well they, the management teams execute on these keys. And then again, success breeds success. It’s getting harder and harder to catch up, I think to some of these winners like, I mean, how do you catch a Microsoft or an Apple type company now if they continue to execute on their innovation? So that’s kind of big picture stuff. What we’re doing in Cabot Early Opportunities and Cabot Small-Cap Confidential is we’re trying to translate these concepts into different market opportunities. And so we’re looking at different trends and we have five here: e-commerce, fintech, automation and security and then the crypto economy that we’re looking at pretty closely. We’ve been invested in many of these trends for a while. Crypto is obviously kind of new, but I’m going to go through with a couple of points on each of these markets just to kind of let you know what I’m seeing and some of the stocks that that I think are interesting in each one.
Tyler Laundon [00:15:12] So first up, here we have e-commerce and trade, a lot going on, we’re all, you know, highly tuned in to what’s going on in the world in terms of supply chains and all of that, much more so than any, any time in history, I think. But what I’m seeing is omnichannel shopping is becoming bigger and bigger and companies have to have this now. So this is brands that are integrating their channels, meaning digital and brick and mortar. So as an example, you’re on your phone, you’re shopping. You can order, buy online, pickup in store, that kind of thing. Or maybe you’re down at the store or they don’t have what you want, but they can order it and have it shipped to your house. So the integration of those channels has been a huge leap forward and will continue to be moving forward. Artificial intelligence in the shopping experience. So things like when you’re online chatbots, virtual assistants, personalized shopping experiences, all these kinds of things that keep you engaged and help you find what you want faster and then help you have customer support when you need it are making a big difference. Also, payment methods, more payment methods that are helping to curb cart abandonment. So mobile payments, digital wallets, the ability to take cryptocurrencies. This is one of those ones where it’s kind of snuck up on on a lot of us, I think, and it’s a subtle thing. But I think, you know, about three or four years ago, if I was on my phone shopping at a retailer and you see something you want, whatever you put it in your cart and then you’re like, OK, how do I got to go find my my wallet? You got the credit card. Do all that. Now it’s like, Bam, things pop up. You can just hit PayPal done. Your credit card can pop up if you save the information done. So people are out there in all areas of the world, you know, hiking or doing whatever, and they’re able to fulfill orders for stuff. And it’s it’s just such a it’s been it’s been a rapid change, but it’s also been a subtle one that I don’t think we think that much about. But if you are a retailer who’s seen those orders pop up in next week or whatever coming in from all areas of the world, it certainly makes a difference when you when you aggregate all those orders together.
Tyler Laundon [00:17:29] Custom manufacturing at scale. So there are a lot of companies that obviously aren’t, you know, making tens of millions of things, but they need to be able to make the proper amount without a lot of inventory risk. So custom manufacturing at scale is important.
Tyler Laundon [00:17:45] And then dynamic pricing has been around for a while. Of course, that helped give rise to a lot of the travel companies, the online internet travel companies. But dynamic pricing is getting better.
Tyler Laundon [00:17:57] And then international e-commerce is another one that is kind of sneaky. It’s coming on strong right now because it is the case where even a few years ago, you might want to order something if you’re in the U.S. from, say, the U.K., you know, it’s kind of complicated. You weren’t really sure what you were going to get or when it was going to arrive or what the shipping costs would be. And that gap is being filled with technology and payment methods. It’s making it a lot easier.
Tyler Laundon [00:18:23] So a couple of companies that that I think are interesting to play this e-commerce trade trend, Shopify is an obvious one, SHOP. Sea Global is SE, that would be for like a Southeast Asia area. Global E, GLBE. DLocal, DLO. Those last two are relatively recent IPOs and somewhat volatile stocks recently, but I think they’re interesting. Avalara, AVLR. Kornit Digital is KRNT, and they’re a digital printing company for printing on fabrics and then Xometry, XMTR.
Tyler Laundon [00:19:08] Let’s move on to fintech, so a lot going on in the fintech world, always kind of hard to wrap your mind around it, but really, I think a couple of things that jumped out at me is we’re seeing more and more software companies become where they have integrated payment platforms. So it’s software plus payments. I remember four or five six years ago where we’d be following a software company, and it would talk about how I was going to introduce the payment platform so that customers didn’t need to leave their application or website in order to purchase. And now it’s like all software companies have payments integrated, and it kind of confounds the mind when you try to think about how payment networks work these days. But again, big picture. What we’re looking for are companies that have integrated payment platforms, and we have to be thinking about the future growth there and innovation as those companies mature and they go into new markets. Also, payment platforms integrated across different channels. So online, mobile, in-person; that all really needs to be seamless now in order, again, for people not to abandon their carts or just kind of give up and go away.
Tyler Laundon [00:20:20] We also see disruptive platforms that are doing things in areas like credit and financing. For example, Upstart. Credit and finance approval that is no longer really based as much on FICO scores. So I think there’s going to be a lot of change in that area, as well as the asset that people have evolved and we have to factor in, but we don’t, but banks and other financing areas have to factor in things like crypto. We’re also seeing a lot more buy now, pay later. Of course, those of us who follow the market closely have been watching stocks like a firm buy now, pay later. It seems like one of those kind of sketchy things because yeah, on the surface, it doesn’t seem great to me that people will be going out and buying something for six, $800 and and financing that. But it’s an interesting market. I think it’s one to keep an eye on. It’ll be interesting to see how it evolves when the economy slows down. And then we’re also seeing a platform to simplify higher value and complex transactions, including international transactions and repeat transactions - just easier and easier to move larger amounts of money around the world. So that’s something to watch.
Tyler Laundon [00:21:41] So in terms of stocks. And there are so many in fintech, including just about, like I said, any software company that has a payment platform, but a few that we’re watching are Upstart that’s (UPST), Flywire (FLYW), Affirm (AFRM), PayPal, which is sort of in the dumps, but PYPL. A lot of talk around Visa and MasterCard this week just related to Amazon and the potential rollback of Amazon working with Visa in the U.K.. Just a lot of implications there. And then also Sea Global, ticker symbol SE, which has a a payment platform that is a large part of that company as well as e-commerce. And there’s also a gaming aspect as well.
Tyler Laundon [00:22:31] So moving on to automation software, obviously I’ve recently talked about software in the context of payments, but another way that we’re looking at software is how it automates tasks. So just again, back to this idea of innovation waves, things happening more and more quickly. We’re seeing software that’s automated being able to complete tasks in minutes or seconds that used to take hours or days. And kind of the idea here is to reduce the load on lower value human labor, remove error prone processes and speed up the pace of business, but also to allow transactions to allow analysis of transactions at scale where it’s just not possible for people to to do it quickly or in some cases, even at all, in like an Excel spreadsheet. Automation software is also playing a role in customization - product customization at scale. And so we look at companies here like Bill.com (BILL), Avalara (AVLR), LAW, that company is CS Disco. That’s a recent IPO. Sprout Social, sort of automation for social media management, that’s SPT. Black Line (BL), DocuSign (DOCU), Digital Ocean is DOCN and that stock has been on a tear recently. And then, of course, Salesforce (CRM), Appian (APPN) and again, Xometry (XMTR).
Tyler Laundon [00:24:09] So with all these digital networks and all of this business activity happening online, obviously, it’s important to secure and monitor the environment. This is something that we’ve been invested in for a while in both Early Opportunities and Small-Cap Confidential and a lot of the other analysts at Cabot are clearly invested in security and monitoring-type stocks as well. This slide is pretty basic, but you know, really what I’m talking about here in terms of secure in the environment and analyzing the environment is we think about a corporate campus. Clearly, they have to make sure that their networks are secure, but as people within those environments start to use more applications, more of these digital applications, the need to manage and to secure what’s going on on all of those applications gets larger and larger. So they need tools that can hunt down threats, you know, snuff out threats, do all that kind of stuff and sort of do that stuff automatically. And then also as we’re thinking about distributed workforce, as many of us now working from home or remotely, much more. Those endpoints, those computers, my laptop here, the laptop that Chris is using, those endpoints need to be secured as they’re tied back to the corporate headquarters. And so there’s a lot going on here. Companies that are helping to secure and analyze those environments and software as Datadog (DDOG), Dynatrace (DT), CrowdStrike (CRWD), of course, Microsoft, KnowBe4 (KNBE) is kind of a new one, SentinelOne is S. That’s another recent IPO. Zscaler (ZS) and then Cloudflare (NET). And Cloudflare and ZS have just both been insane lately.
Tyler Laundon [00:26:11] And then last but not least, certainly not least, is the crypto economy. And this is something that I think a lot of us are trying to wrap our minds around and have been for a while, and we’ll continue to be trying to do so for a while, kind of like in the early stages of the internet. But I think now it’s almost more like. Sort of the analogy I draw is six, seven, eight years ago, cloud computing came on and we kind of felt the need to define cloud computing whenever we would talk about it because it was sort of this nebulous concept of things happening in the cloud. And I think the crypto, the crypto economy is kind of the next stage of evolution in a way of software and the infrastructure of the internet, digital infrastructure. It’s something that we really can’t ignore anymore, even if we want to. Market value now - the crypto economy is over two trillion, with over 200 million users. Certainly has been spurred by younger generations, but also now more corporations getting involved and financial advisors as well. And it is definitely more than bitcoin. It’s an economy, it’s an asset class and an ecosystem. And like I was saying, it’s kind of like the next generation of software - the internet of cloud infrastructure.
Tyler Laundon [00:27:33] Trying to put crypto economy into an easily digestible slide is impossible, but we’ll take a stab at it here. So as I said, it really is about a software architecture that’s built on this blockchain of distributed ledgers, and there’s a number of different components to that. We don’t need to understand all of these, but it’s kind of one of those things where I think it’s almost like learning through repetition. You just have to sort of take your times tables, right? My kids are in one of my one of my boys is in third grade and I’m like, Listen, you just have to write it down and practice and you’ll eventually get it. And that’s kind of what this is. It’s just drilling this stuff into our heads to understand that the crypto economy is made up of things like decentralized applications, stablecoins that are pegged to currencies. Things like Tether. The US Dollar Coin and the Binance Coin are the three biggest ones. We have non-fungible tokens, or NFTs, which show ownership of a unique digital or physical asset. It isn’t necessarily ownership of the digital asset itself, it’s the ownership of that asset. We’re going to see central bank digital currencies to help replace and supplement the actual currencies. And then, of course, there are tokens like Bitcoin, Ether, Cardano, Binance and a whole bunch more. Obviously, like I said, too much to try to wrap your mind around in one slide, but we’re trying to take a stab at it and and kind of educate, educate whoever we can starting slowly.
Tyler Laundon [00:29:08] A lot of risks to the crypto economy, just like the early days of the internet. It’s kind of you don’t really know what it is. It’s a little unknown, hard to differentiate between hype and reality. Regulation is a huge risk. We hear about energy use and then, of course, software bugs and hacks. I mean, how do you secure a digital network? And what are the implications of breakdowns there?
Tyler Laundon [00:29:35] But again, going back and thinking kind of big picture about the crypto economy and cryptocurrencies. This chart does a pretty good job and again, this is from VisualCapitalist.com. And so as you can see here. A lot of information here, but but really the idea is. The dark blue here area here is bitcoin. This pink area is Litecoin, light blue here is Ethereum. So this is just this graph - this chart is showing the number of transactions processed on these networks growing over time. I have to look over here to a bigger screen so I can see this better. The way you can see and here is 2014, 15, 16, it’s pretty much all about bitcoin, and as we get into 17, Ethereum comes into play. Volumes there starts to go up. And since mid 2017 or 2018, bitcoin has been up and down but relatively flat, whereas transactions on Ethereum have grown much more quickly. And the takeaway message here is one of the reasons for that is Ethereum really is more of like a platform technology where applications, decentralized applications are being built on it. And so that is helping fuel higher growth on the platform. As we slide over here to talk about the bullets here that I have kind of again, the point here is that crypto users are transacting more frequently and this market that has been created, which has a market cap of around two trillion dollars, right, kind of in line with the Google, Microsoft kind of type company. There’s been a ton of value created there. And holders of cryptocurrencies have that value that they can do whatever they want with. They can keep it in there. They can buy houses, they can buy, you know, computers, whatever. Merchants have, of course, realized that, and they’re starting to accept crypto more and more frequently. The data shows that that has been a good move for them that merchants that accept crypto see it as much as a 40 percent jump in new customer sales, two times higher order value and then also a 55 percent reduction in transaction fees. So clearly merchants that are accepting cryptocurrencies are winning. And this is kind of one of those things where as investors, we may be thinking it’s kind of crazy how much people are spending Christmas shopping or whatever, but in some ways there’s this new asset class of crypto that we’re not really accounting for. The people are able to shop with and maybe to some, it sort of seems like funny money where they’ve done very well and they can go out and buy a house or. Like I said, Christmas gifts or whatever. But I think the point is is we need to be thinking about this asset class and the transactions that are happening in the crypto economy. And we need to be thinking that in sort of big term concepts, merchants that are accepting, retailers that are accepting crypto just being one of them. And I think as we move forward, we want to be looking for if I’m an investor in a retailer, I would like them to be able to accept crypto.
Tyler Laundon [00:33:15] In terms of ways to play the crypto economy, there are a lot there’s going to be more and I’m not recommending these companies or these ETFs, but just putting this out there. There are going to be a lot of winners and losers along the way, of course. But right now, what’s out there, the exchanges. So Coinbase recently became public. And that’s COIN. And then Robinhood (HOOD). A couple of private exchanges are Binance and Kraken. And of course, these exchanges are kind of like the TD Ameritrade, Schwab, E-Trade of stocks. The cryptocurrencies themselves, of course, you can trade on those and you can buy those on these platforms so Bitcoin, Ether, Tether, and there’s a whole bunch more. Dogecoin, Litecoin, whatever. And then more and more we’re seeing Bitcoin ETFs. Both on US exchanges, but also on the Canadian exchanges, so BITO, GBTC, BITQ and then BTCC.CA, maybe BTCC.TO, depending on whatever platform you use. There’s also a Etherium ETFs (ETHE) and then the ETHR.CA. And then in Canada, we’re seeing many more mining stocks. So these are companies that are actually mining for crypto HIVE, BITF and HUT and ARBK are a few. Some of those companies reported this week. Kind of interesting just to see what they’re doing if you have time. And then I think, you know, look for more crypto economy companies to pop up with digital products and assets in markets like finance, gaming, social. It’s going to be one of these things where it’s going to be sneaky, where you start to see crypto ways that the way the companies are gaining exposure to the crypto economy, not necessarily by mining bitcoin or whatever, but by, like I said, a retailer accepting crypto or a fintech company accepting crypto, things like that.
Tyler Laundon [00:35:23] Other considerations looking at companies that are making major hiring moves. So blockchain hiring IBM way, way, way higher than anybody else in terms of headcount allocated to blockchain. I think it’s interesting to consider, you know, could this be IBM’s chance to? You know. Don’t want to be too rough on it, but do better than it did over the last couple of decades. Accenture (ACN), a lot of headcount hiring their Oracle, Microsoft, Google and JPM as well. And then also sort of out of left field ways to play bitcoin; major shareholders companies that are converting reserves to bitcoin. So we have MicroStrategy (MSTR) is starting to hold a lot of bitcoin instead of cash for treasuries. Of course, Tesla, there’s Galaxy (GLXY.CA). And companies like Square (SQ) and COIN are doing it as well, and we’re probably going to start to see that happen more and more. All right, Chris, I’m going to take a breather there and hand it over to you and just again ask people to be thinking about questions that they can answer soon.
Chris Preston [00:36:47] Yeah, yeah. Thanks to you. Take take, take a breath. We already actually have a lot of questions rolling in. So before we get to that, I just wanted to quickly, you know, if you will, if you like what you’ve heard from Tyler so far today and interested in signing up for either of his advisories, you can visit the website on your screen, which we have special discounts for both for only for listeners to today’s webinar. That’s CabotWealth.com/webinarspecial. His two advisories are Cabot Small-Cap Confidential, which is a limited, limited-circulation advisory for investors seeking profit opportunities and high potential small cap companies. Each month, in Cabot Small-Cap Confidential, Tyler Laundon has in-depth research on one outstanding small cap stock that is a pioneer in its field and undiscovered by institutional analysts. As I mentioned before, he has an average return north of 200 percent for stocks in that advisory. And then there’s Cabot Early Opportunities, which is focused on industries with turbocharged growth and tailwinds at their back and sets you up for gigantic returns. Thinking in terms of the internet in the 1990s or personal computers in the 1980s, smartphone software, the software over the past decade and Tyler will help you find the next opportunities, as we’ve been discussing today. And again, his return - that was only launched a couple of years ago - and his average return on his stocks in that portfolio is over 100 percent. So again, you can subscribe to either advisory or both at a special discount offer reserved exclusively for today’s listeners. By going to CabotWealth.com/webinaspecial. You will also received the offer in an email in your inbox. Keep an eye out for that.
Chris Preston [00:38:50] OK, let’s move on to your questions. A lot of people waiting patiently. Let’s see. I’ll start with Julio. Julio’s asks Tyler for your take on Intel.
Tyler Laundon [00:39:08] OK. Thanks, Cleo. I’m going to switch over so that we can look at - we can look at the stocks that people ask about. I have to admit Julio, I don’t follow Intel all that closely. It’s been much more interesting and exciting to watch some of the other players in this space. So be totally honest, I don’t have any great insights there. I think just based on the chart and sort of what I’ve been understanding, it’s it’s not my not one of my favorite picks right now.
Chris Preston [00:39:47] Yep. OK. Another stock that I don’t think you mentioned. Question from Chris, not me, Chris. Curious if you’d share why SQ is not included in your fintech list? Square.
Tyler Laundon [00:40:06] I thought I did include that in there.
Chris Preston [00:40:11] They might have asked before it came up, but what I guess, what are you, what’s your opinion on Square?
Tyler Laundon [00:40:16] I think it’s it’s one of those companies that kind of like. I mean, it’s been around, and it’s super interesting, as you can see on the chart here, it’s been kind of going sideways for most of the year. It’s kind of like Visa and MasterCard in a way obviously different, but similar where it’s kind of hard to wrap your mind around where this is going to go in terms of payments on different platforms over the next three, five, 10 years. I think that, my personal feeling is I like to have exposure to companies like Square, Visa, MasterCard, because even though they’ve been around for a while, they’ve shown an ability to innovate and change and win business. So I wouldn’t want to give up on them unless I had a real good reason to. At the same time, they also don’t feel like the most innovative companies right now, or at least that the pace of growth within them isn’t isn’t there as compared to some of the smaller players. So it’s kind of like you want to have exposure, but diversify it as well.
Chris Preston [00:41:37] OK. Question from Stan. Stan asks, Tyler, do you invest in clean tech stocks? And if so, which ones do you like?
Tyler Laundon [00:41:47] Yes. Well, we I like some of the EVs, I mean, you know, share price dependent, but certainly Fisker has been interesting. It’s been a big couple of weeks for them. I do think that Lucid is interesting? I mean, I think all of these, these EV makers are interesting. Let’s. We have had exposure to companies like Solar Edge, at times, we don’t right now, Bloom Energy is another one we’ve had exposure to, but we don’t right now. It kind of goes in waves. Lately we’ve been we’ve been putting money to work in other areas, but maintaining some exposure and in clean tech.
Chris Preston [00:42:38] And then we actually, at Cabot, have a new advisory that’s devoted specifically to to clean tech, it’s called our Sector Xpress Greentech Advisor, which has a really good analyst named Brendan Coffey running the show. So if you’re interested in those specifically, I’d check that out on the CabotWealth.com website.
Chris Preston [00:43:02] Eric has a question about the advisories - your two advisories. He asks, What’s the difference in the companies you recommend in your two advisories?
Tyler Laundon [00:43:11] OK. Yeah. Good question, Eric. So in Small-Cap Confidential, it really is small cap companies. So mostly when we get into a company, most of them are going to have market caps under five billion, really most under four billion, although that is creeping up a little bit. And then we will hold on to those, though. We have companies now that we’ve had that are up several hundred percent that have market caps of 10, 15, 20 billion dollars. There’s no reason for us to get rid of them just based on market cap alone and Early Opportunities, market cap doesn’t really matter. So we could own Snowflake, Airbnb, companies that have one hundred and eighty billion two hundred billion market cap. One of the reasons we wanted to launch that product is because we are seeing this trend of much larger companies coming public, and it was sort of frustrating for a year is not to be able to advise on those companies when we only had a small cap product. So they do they do do different things. We try not to have much overlap. And that’s what they’re that’s what they’re both about.
Chris Preston [00:44:27] OK, I’m going to try and get this name right. Srinivasa, has a question. What is your take on EV valuations, small companies delivering hundreds and a little less than thousands of cars having equal market share or more in GM and Ford?
Tyler Laundon [00:44:50] Yeah, it’s one of those kind of mind boggling things, it doesn’t really make any sense whatsoever. At the same time. There’s companies that like Amazon, Shopify, Tesla. There are examples of companies that valuation hasn’t made any sense whatsoever for years. And so it’s. It’s one of those situations, I think, where I try not to have like an all or nothing type perspective on it. I mean, let me pull up like Fisker, as an example, and hopefully you can see my my cursor, but clearly, you know, the benefit of hindsight buying Fisker up above 30 wasn’t a great idea buying it below, you know, in the $15 range made a lot of sense. I think the key for me personally and what I try to advise subscribers on is if you like what the company is about and you believe in the product and the strategic roadmap, then don’t let the price keep you out. Tailor your purchases to how you feel about the stock at that time, I mean, if you want to speculate on a stock like Fisker that’s trading up at 23 buy fewer shares, average in. Use that strategy over time, because if you think that a company like this is going to be a winner five 10 years down the road, probably it’s not going to make a huge difference if you bought it, if you averaged in between 15 and 25 or 30. Personally, I would rather have that exposure than not have been in it at all because I was waiting for a price that seemed like a no brainer. So as that relates specifically to like a Rivian. As you can see, what it came public at 78 here, closed up at the first day, went up to 180 and back down to 120. I mean, I think that this chart is going to look a lot like Fisker’s chart over the next six to 12 months, so it’s just about averaging in and then having the conviction that you want to own that stock.
Chris Preston [00:47:23] Yep. OK. Interesting question from George. George asks, Does infrastructure money help any of these small companies?
Tyler Laundon [00:47:33] Yeah, it does in in different ways. I think, well, one example there’s there’s the there’s the real way, which is the money actually flowing to the company and then there’s the investor sentiment way, of course, which may just help the stock. So an example. Descartes Systems DSGX. So this is supply chain software. There is money in the infrastructure bill for supply chain. Whether or not that drove this recent move here or not is hard to say, but it wouldn’t surprise me if it drove some of it. What I like is a company that I think has a sound business model without any benefit from the infrastructure bill where that is kind of gravy and helps. But I wouldn’t invest just because of infrastructure bill speculation, really.
Chris Preston [00:48:31] OK. Question from Dan, Do you do any research on SPACs?
Tyler Laundon [00:48:39] Yeah, not I mean, I’m not like a SPAC guy, we don’t have like a section that’s devoted just to SPACs, we just, if there’s a company that we like and it’s a SPAC - that’s great. Fisker was and we’ve done others as well, but we’re not like, we’re not like, you know, here’s our SPAC list of what’s coming out this month, and these are the ones we like.
Chris Preston [00:49:03] OK, another stock specific question, I’m intrigued by GLBE. That’s Global E online post IPO. Do you agree?
Tyler Laundon [00:49:16] I do agree. I’m intrigued by it as well, I think it’s an interesting story. I don’t know if you’ll be able to see this to be able to read the actual text on here, but clearly you can see the pattern on the chart came public, came public and didn’t have much of a move after it became public. At 25, it was up two percent. But that move came after that and then a pullback lockup expiration passed recently, and that seemed to have marked a little bit of a short term bottom. Stock has been up since. It is a way to play global e-commerce. What they do is kind of high level because they help merchants sell all over the world with localized websites, languages, that kind of thing. They have a partnership with Shopify. So, yeah, I think it’s an interesting company. It is. It’s going to be one of those ones where it’s going to have considerable ups and downs, I think, but I do like it.
Chris Preston [00:50:21] All right, we’ll do a few more, Lance has a question about crypto with crypto. What are your thoughts on breaking into this in terms of a trade and sizing to get more familiar with it without too much risk?
Tyler Laundon [00:50:36] I like the concept of investing in something as a way to learn more about it. It’s it’s kind of hard. It’s easier for me to to pay attention when you have skin in the game. So to me, maybe the ways to do that are like one of the Bitcoin or Ethereum ETFs again. I mean, personally, everybody do what feels right to them, but not not a huge stake in those. And then in a company like Coinbase or Robinhood, I think could be interesting. And then using those platforms to kind of play and ramp up investment as you understand and feel comfortable with it. I’m one of those people where if I don’t understand it, at least to some degree, I don’t really want to be in it. Other people are different, but for me, I like the idea of investing in something as a way to dip my toe in to learning more about that market or the market that that company plays in.
Chris Preston [00:51:40] OK, we’ve had a couple of questions about - going back to EVs and charging companies, ChargePoint and Plug Power. Do you have strong opinions on on those too?
Tyler Laundon [00:51:59] I don’t have strong opinions on them. Obviously, they’ve been in the news a lot and they’re getting a lot of attention. Clearly, an infrastructure play which needs to be built out for EVs to work. I have to apologize. I don’t have any great insight in them because I haven’t been looking at them recently.
Chris Preston [00:52:21] Ok. All right. All right, we’ll do one or two more here. Let’s see. Question from Neal, about SE, about Sea Limited. Can you come on an action in SE recently and what are your thoughts?
Tyler Laundon [00:52:46] Yeah. Well, first, we have to give a shout out to Carl, who Carl manages. What is it now, Chris, The Global Explorer?
Chris Preston [00:52:56] Cabot Explorer, Carl Delfeld, yeah.
Tyler Laundon [00:53:00] So Carl took a swing at Sea Limited. What? Like a thousand percent ago?
Chris Preston [00:53:07] Yeah, it’s a long time ago.
Tyler Laundon [00:53:08] Yeah, something like that. And I remember when he did it, Morgan Stanley had picked up [] and I was looking at it as well. And I was like, I don’t really understand what this business does. It’s e-commerce, it’s gaming in Southeast Asia and. It seemed really interesting and just never did anything, and Carl did so definitely a shout out to him. I think big picture to me, Sea Limited is kind of like an Amazon for Southeast Asia. I’m sure that that analogy is out there and has been referenced a lot, but it’s a it’s clearly a little bit different, but it’s one of those companies where. Is it what’s worth what’s worth - to never have been invested or to jump in what seems late? I mean, even, you know, just as an example, if you bought Microsoft five years ago, you were both late but also have done very, very well recently. So Sea Limited to me right now feels like a company like that where I think it’s just it feels like such a behemoth in that space that it’s interesting in terms of their reaction specifically to earnings. It is down over the last three sessions. What I’ve read up on it from the major banks that are following it, nobody’s really jumping ship, it’s more of like, OK, this is a pause as they go through an investment phase. The business is - there’s three parts to it. There’s the e-commerce, there’s a gaming, a social gaming business, and then there’s like a finance fintech platform and the e-commerce is investing in expanding in other countries. And so there’s a big investment phase there, which is crimping margins and their gaming area has slowed down a little bit. But they hopefully are refreshing that, the customer acquisition channel there with with an upgrade to their most popular game and some other interesting things going on in the fintech side, which would take too long to get into. But again, big picture, it’s one of those companies that I think personally I would. I would rather be a little bit late to the party on, but still have exposure to and it seems like an attractive one to be to be buying on this dip.
Chris Preston [00:55:30] OK, last question. With the hyperinflation, with hyperinflation, do you think the valuation of these companies, many of these companies, could take a hit in the next couple of years.
Tyler Laundon [00:55:42] Well, the assumption there is that we are going to have hyperinflation, which I’m not on board with that. Not going to argue with anybody that feels that way. I think that. I mean, it’s hard to read the tea leaves right of where inflation is. What’s going to happen there? I’m kind of in the camp that it’s been - we’ve been undersold on where inflation is going to go. It’s going to be higher than we think. But it’s not going to be some runaway scenario like Argentina or some or somewhere else. So. I think, yeah,
Chris Preston [00:56:20] Yeah, I just wrote about this the other day, stagflation versus hyper inflation versus what was the Fed buzzword, not temporary inflation, and it’s it’s escaping my mind at the moment.
Tyler Laundon [00:56:31] Transitory.
Chris Preston [00:56:31] Transitory inflation feels like it’s somewhere in between transitory and hyper. I mean, hyper is extremely rare, and I don’t think it’s ever happened in the US, or at least it hasn’t for decades and more and more places like Argentina. Yeah, who knows how long it will last? You probably have a better insight into that than I would.
Tyler Laundon [00:56:56] Yeah, I mean, it’s one of those things my wife and I were talking about inflation last night. Super interesting conversation to have with your significant other. But, you know, I mean, there are both good and you know, maybe part of some inflation is wage growth, which has stagnated for a while. And you know, there are some pros and cons there. So. But again, if somebody believes in a hyperinflation scenario, I’m not going to try to talk them out of protecting themselves for that eventuality or potential.
Chris Preston [00:57:29] Yep. Well, thanks, Tyler, and thanks for all the great questions. This was a really good Q&A session.
Tyler Laundon [00:57:36] Yeah, thank you, guys.
Chris Preston [00:57:37] Yeah. And yeah, thanks for joining us today. We’ll be back next month with the webinar from Jacob Mintz, who’s our options trading expert and Chief Analyst of our Cabot Options Trader and Cabot Profit Booster advisories, among others, where Jacob will be talking about four common options trading mistakes and how to fix them. And that’ll be at 2:00 p.m. Eastern on Tuesday, December 7th. So just a few weeks from now, that does it for us, for Tyler Laundon and the entire Cabot Wealth Network team. I’m Chris Preston and we’ll see you next time.