An unconventional e-commerce bet: Signet Jewelers Ltd.

Have you considered diamonds as an e-commerce bet on stocks?

I hadn’t until I read a post about Signet Jewelers (symbol SIG) in the jewelry space, that deals heavily in engagement rings.

Now that might seem odd for a blog that focuses on technology stocks to talk about something so physical like jewelry and precious stones. But it’s not, really.

The pandemic crushed SIG’s stock price because it was a physical store retailer. You know, in malls and such. Remember those? But that’s not what makes this interesting or a tech investment. No, it’s this.

Signet’s pivot to e-commerce

They pivoted to an e-commerce store, and they’ve done it pretty well and quickly. And they’ve seen growth. 

They also own a lot of brand properties that you would recognize like Kay, Jerad, Zales and James Allen. They’re all national brands that most consumers would know, and that recognition doesn’t just fade away. They have staying power. And, yeah, those brands belong to SIG. And now it’s moving much of its transactions and sales online. 

Signet has some interesting tailwinds

And here’s the really interesting part: Online dating is on fire. That is directly related to SIG because they are in the love business. When people are going on their awkward first dates, even over Zoom, and, if something magical happens and they fall in love, that means magic will happen with SIG: They’ll get sales. 

They will sell jewelry and engagement rings by the stock-price-moving boatloads. 

I think people are dating more in these weird times because social distancing and isolating are causing us to realize that being in a relationship is a good thing. We aren’t designed to be alone. And being in all of that aloneness creates pent up demand for relationships, dating in particular. And the culmination of that is often marriage. 

And no matter what you’re opinion of diamonds is, people buy them when they’re in love and getting ready to get engaged. That’s the norm—even the expectation. 

That’s where SIG will do well. Inevitably some of those lovers will end up in one of Signet’s online stores and buy a rock to display their undying love in an expensive little (or not so little) stone. 

Customer behavior is changing

And buying something worth thousands of dollars online sounds absurd. But it isn’t. The behavioral trend is certainly in its favor. Just the other day, I bought a car, sight unseen. That’s right. I didn’t even test drive the vehicle before I wired over a lot of money to the dealer. Don’t worry; it worked out, and the car’s great. And consumers are doing this more and more. That’s why companies that sell cars exclusively online, like Carvana and Vroom, exist. So if people are willing to buy a car over the internet for thousands of dollars, it’s not a far step to get a diamond online either. 

And that’s where brand recognition shines. People will be far more willing to shop from brands they know. Covid is likely making that behavior even stronger since consumers are forgoing in-store buying. For consumers to buy big-ticket items online, it helps to have stronger branding, returns policies, and a greater ability to imbue trust. Signet with their brands does that. That branding is gold diamonds for a company that has it.

And that can flow down to investors who hold SIG stock. 

Signet’s competition

There are other brands that SIG doesn’t own but are recognizable like Blue Nile. There’s competition. But that doesn’t mean both of them can’t exist in the same universe and still win. They can. They can both make money and still exist fat and happy.

The jewelry business has always been fractured. There are thousands of mom and pop stores. Then you have the larger retailers and the national brands. And many have been doing just fine even with so many other jewelers. 

Closing thoughts

I don’t hold any shares of SIG at the moment, but I am watching it. It’s interesting. It’s been rising since it bottomed around $5 in March, while in the throes of pandemic fears. Before that, in November 2015, the price of the stock maxed out around $150. Yesterday it was hovering around $20, almost quadrupling since March. As long as it survives and truly makes the e-commerce work, there is a lot of upside for this stock.  

Of course, there’s risk. All bets are risky one way or another.

The point is to lower the amount of risk as much as possible by finding companies that can grow and dominate their markets and have favorable market conditions. And Signet certainly seems to have all of that going for it. 

And, maybe, if you invest well and you’re one of those lovebirds who bought an engagement ring, you might be able to get your money back on your engagement ring by investing in SIG. 

Don’t take my word for it though. Do your own research and talk to a professional advisor. 

Happy betting. 

John 

One of the greatest secrets to making money in the stock market

The hardest thing about investing in stocks is letting go of your money. Let me explain.

When you invest your money into the market, you can’t control how the stock price will behave, and often it will go down. And the temptation is to sell when it does that. And that will mean you will “realize” your loss, which means the money you were losing before you sold your stock, called a “paper loss,” will become a real one if you sell your stock when it goes down from the price you bought it. So you will walk away with less money than you started with. No one wants that.

But it has happened to everyone; I’ve done it; even the pros have, too. But that needn’t happen to you. And it’s all about your approach.

If you approached buying stocks differently, you’d avoid realizing your losses and will even make gains. You can even get rich. And that means you need to understand that once you invest your money into a stock, you need to cease thinking about it as money to succeed.

You see, investing in stocks is about thinking less about your money and focusing more on your investments. Because to make more money in the stock market you can’t think about money. That will just make you lose it faster.

When you focus on your money when it’s invested in the market, especially in tech stocks, there’s volatility. A lot of it…boat loads of it. Those are the ups and downs a stock price will go through on any given day. You know, the ones that scare the crap out of you, that make you jump ship and sell before you ever intended to, the ones that make you feel like you’re going to lose all of your money if you keep holding on to that stock. Yeah, those.

Holding on when you get into a stock is especially hard when you first buy a stock and then it goes down, like, immediately after you buy-in. It feels awful. I know. I’ve been there—many times.

I bought Nvidia over a year ago, and it dropped by 50% or more over a month or two. So, at that point, I was thousands of dollars down. And believe me, I wanted to sell and realize my paper loses. It felt like everything inside of me was burning down. But I held on. I didn’t sell.

Instead, I waited.

If you buy a good or great company’s stock and it goes down, they will often go back up and continue to grow. That’s what great companies, especially the ones that are market leaders, which Nvidia was and is, do. Waiting and holding your stock position will help you avoid a loss even when you’re thousands of dollars down. And more importantly, eventually, you’ll gain.

To do that, you have to let go of your money. You need to stop thinking about your money as it is. Yes, it’s hard to see the ten thousand dollars you initially invested become five thousand when a stock price drops. And, yes, it does feel like someone just reached into your pocket and robbed you in broad daylight, while smiling at you. But, if you can short-circuit your brain and stop thinking about your money as money, you’ll begin to see something else. Something better.

You’ll start envisioning yourself as an owner. Because, really, that’s what buying a stock means. You own a small piece of a company. When I bought Nvidia’s stock, I owned a small piece of the world’s best chip designer. And sure, the stock fell out of favor right after I bought it. But when I wasn’t focusing on my money, and the imaginary guy’s hand in my pocket, I was able to focus on my investment. And I remembered why I bought it in the first place, which made it easier to hold on to the stock and wait. And I could see that the company was going to be ok and was able to remember that it was the market leader and the best at creating AI chips and would continue to innovate. Doing that helped me stop thinking about my 50% drop and realize I owned a piece of a world-class company.

After several months, Nvidia fully recovered to the original price I bought it at. Then it continued to go up, as did my net worth. I did sell it, unfortunately. That’s because it dipped during the covid scare earlier this year, which is when I sold it, to my chagrin. It was for a gain, but for far less than I would have if I held on. If I would have held on, instead of making a little bit of money, I could have more than doubled my money.

That’s the thing about making money in the market. When you think less about your money, the more of it you often make.

Now, I’m not saying that every stock will recover or will be a winner. And, I’m not saying that everyone can get rich investing. I am saying that you need to do your homework and need to invest in the best companies you can find. And if you do, and hold on, your chances of growing your wealth is much greater, than if you don’t.

You see, you don’t become rich by thinking about money. No. You do it by thinking like an owner.

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Why I decided to buy Fiverr stock and not Upwork

On the surface, Fiverr and Upwork almost seem the same. But, they’re not.

Both help customers find freelancers to get a website designed or built or a video or some other creative work created. 

But if you dig deeper, that’s when you see the difference. And they’re meaningful. 

The differences between Upwork and Fiverr

Upwork helps you find talent, but there’s more friction when you use the site. To find what you’re looking for, first, you need to sign up for Upwork and answer a set of questions before getting anywhere. You can’t see anything helpful or the type of person you’re looking for until you go through their process. That’s annoying. And making people annoyed is not a great way to win customers. 

Fiver doesn’t do that at all. On the top of the home screen, there’s a search field, and anyone can type in they type of work they want help in, say CSS, and instantly you’re provided a list of people, with reviews and ratings, who’ve CSS’d for others, from which you can choose. It’s easy. And it’s instant. There’s little friction. 

And that’s critical. It’s the difference, really. Fiverr makes it easy for their customers to do what they came to do, which is find help. Removing friction is one of the most important things a tech company can do. And when they do, they unlock value that can scale incredibly fast. That’s one reason Fiverr’s stock and revenue are shooting up like a firework on Independence Day. Upwork’s revenue is up 19% in the second quarter year over year versus Fiverr’s 82% growth. That’s a meaningful difference.

The business model is also very different. Upwork has a subscription model with a classified labor site. Then they will offer bundled solutions. But Fiverr helps the customer find a freelancer as quickly as possible. 

And their monetization model is meaningfully divergent from Upwork’s, too. Fiverr just takes a percentage of the fee that is paid for the project. There’s no need for the customer to subscribe to their service or platform. No, they just find someone and start the work, and Fiverr’s fee is baked into the process, which doesn’t require the customer or the freelancer to do anything else other than to get to work and get things done.  

The power of the two-way marketplace

Fiverr and Upwork are also two-way marketplaces that source affordable talent globally and connect them with willing and hungry clients. But Fiverr is running away with the show. 

Year to date, their stock is now up over 500%. That’s a lot of zeros of performance for just twelve months. If you invested $10,000 in Fiverr stock a year ago, it would be worth around $60,000 today. 

And yes, that’s the stock I just bought yesterday, the one that’s already up 5X. 

You might be thinking, “John, buddy, that stock is way too expensive and it’s already had its run.” 

There is credence in what you say, especially if the stock drops drastically in the next several months, which it probably will. But the question is, When? We don’t know when it will drop, and how far it will continue to rise before it does. Instead, I think we should be looking at the fundamentals of this company and why if it has the power to sustain its growth. 

The industry is huge and growing

The fact is the freelance market these companies are working in is huge. Some say it’s $100 billion. But I think it’s bigger and will continue to grow. Upwork and Fiverr are opening up a larger market for freelancers. And once companies and individuals get more and more accustomed to this way of working, they will only use it more and allocate their resources accordingly. It will change the way business is conducted. So that $100 billion pie will become something much larger. 

Also, I know the creative industry. I have a creative agency. And, from my experience, businesses will always need talented people who are willing to help them with their creative needs. And once they see that they can get quality work on Fiverr, or Upwork, for a cheaper rate than domestic talent offers (much of the people who provide the work on those platforms are international), they won’t look back. In this video, a Youtuber shows how he found a couple of people to build him websites, one for $100, the other for $30. And he said that both of them were pretty good. Yeah, that’s right, thirty bucks, for a pretty good website. I’ve been in creative services for a decade now, and I have never, even in my most cash desperate days, ever thought about charging that little for a website. $30 is what I would spend on a business lunch. But that shows the power of Fiverr. It offers that type of value, where you can get a solid website for the same price you would spend for an overpriced sandwich. Since that’s the case, why wouldn’t more people use Fiverr? They’d be crazy not to. And if you can find that talent easily and reliably, it will only grow as a source for creative work. 

And not just that, two-way markets are incredibly hard to create. That’s when you connect the supply side with the demand. Airbnb, Amazon, Uber are all two-way marketplaces. Airbnb connects hosts to those who need hosting, Amazon sellers to buyers, Uber passengers with drivers. And they are huge and seemingly indomitable entities because they built a marketplace and reached an incredible scale so it’s hard for anyone else to really threaten them. And building them isn’t easy, and once they are built, they are very difficult to dislodge. Fiverr is one of those two-way markets. 

Now, since the total addressable market is enormous, $100 billion plus and growing, it allows for more than one player to grow comfortably. So Upwork and Fiverr can both exist as Uber and Lyft do. Duopolies can live fat and happy lives without killing each other. However, I do think that Fiverr can become the more dominant party here. They have the momentum and all of the right pieces going for them. 

Closing thoughts on Fiverr and Upwork

Yesterday, I actually invested in both Upwork and Fiverr. Then I started digging further into the differences. My company has used Upwork. And when I invested, I thought, “What’s the big difference?” Upwork actually seems to be the cheaper, in terms of stock price, than Fiverr. Upwork hasn’t had a 5X uptick in its stock price. But then I realized that Upwork didn’t have a huge revenue boost or the same trajectory or momentum either. So I sold out of my positions of Upwork. 

That doesn’t mean that Upwork can’t change and improve its customer experience model and design. But, for the time being, they haven’t. And the price of their stock represents that difference.

And that means the difference between me buying and holding one and selling the other. 

That’s why I’m long Fiverr. 

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Berkshire Investing in Snowflake Is Revolutionary

Berkshire Hathaway’s investment and Snowflake (symbol SNOW) is a wake-up call to all investors, for both value and growth.

The stake it took was a whopping $730 million. And yes, it made a 100% gain in the first day of trading, making their investment worth $1.6 billion before Warren Buffett, the CEO of Berkshire, even cracked open his second Coke Classic of the day. And it’s easy to get all wrapped up in that, the gain, not the Coke, and think, “Golly, that Buffett is amazing and rich and amazingly rich.”

But that would mean we just see the glitz and glitter; we’re missing the big picture because there was a seismic shift that happened when Berkshire invested in Snowflake.

The Real Meaning Behind Investing in Snowflake

They shifted to growth investing. I’m not saying that Berkshire believes that value investing is dead or that they won’t be looking for those types of opportunities ever again. But they are legitimizing growth investing. If you look beyond the noise of Snowflake’s doubling and this and that return, you can see the signal that Berkshire is sending is revolutionary. Remember, to learn from any investor, don’t listen to what they say but what they do. And what Berkshire did was invest in an IPO that was already expensive and carries all of the uncertainties of a tech IPO, yet, they still invested. Yeah, it’s big.

Sure, Berkshire isn’t unfamiliar with investing in tech. Two of their largest holdings are in Apple and Amazon, longtime darlings of the market. And as much as Apple could be considered a value play, Amazon certainly was not and still isn’t. It has always been expensive. But investing in Snowflake is another step toward a different investing framework that is evolving in Berkshire. And here are some of my thoughts about it.

It’s validating an investing strategy that has long been perceived as being at odds with value investing. I don’t think Buffett thought that. But it was clear in his previous investments in consumer goods and airlines, etc. he was investing like a classic value investor. And as the world changed and their performance shrunk and dwindled while the technology sector seemed to be swallowing the universe with tremendous growth year after year, it doesn’t take a genius to see that the world has changed. Now we see the greatest value investor act in a way that is contrary to that investment philosophy.

Now we shouldn’t just pay attention to the macro steps but also the micro ones. By doing that, we can learn from why they invested in Snowflake and made this change.

What We Learn From Berkshire Investing in Snowflake

They weren’t spraying and praying. No, Berkshire knew the power of Snowflake. They were informed and intentional. As an earlier customer of Snowflake, Geico used it to store and analyze their data. They knew Snowflake’s monetization model since they likely pay them a lot of money. And they probably did it happily since they found their services invaluable. That insight and experience caused Geico’s CEO to lead one of the earlier rounds of investing in Snowflake, pre-IPO. And all of that information was almost certainly shared with Berkshire and Buffett. So they had deep, intimate knowledge of what Snowflake does and what it could do in the future.

Berkshire focused on winners. Geico started using Snowflake, presumably because their service and platform was better than other providers. They saw the edge. Snowflake had set themselves apart from their competitors in their offering of better technology and services. Berkshire had an early look into Snowflake at scale, since Geico is a large company with massive data. And if Snowflake helped Geico make more informed and insightful decisions through Snowflake’s product, that’s an incredible advantage as an investor. They saw how powerful the product is and how much it can bring to any industry, company, customer. And it looks like Berkshire believes Snowflake can be a dominant force in their market.

I had a similar experience at a much smaller scale. My company used Shopify and Twilio to build software solutions for our clients. And my business partner kept on talking about how great these platforms were. And once I realized that they were publicly traded companies, I invested. And they, especially Shopify, have performed incredibly well for me. That’s what experiential information with first-hand experiences as a customer, like Geico had, can do. It gives a powerful insight into a company. It helps you see how valuable it really is.

The reason that Snowflake is different from Amazon and Apple is that the latter two already dominate their respective industries. Who’s better and bigger than they? No one. The likelihood they will get knocked off their lead is very unlikely, especially in the near future. So they are relatively safe investments. It’s a more of a value play. But Snowflake isn’t that dominant. They are not the biggest player in their industry. So there is inherent uncertainty. Yet, Berkshire still invested.

Why This Matters to All Investors

Why does this matter to us, smaller investors? It should make us re-think. If you are a value investor, it should make you reconsider your investment strategy. When one of the greatest value investors starts to use a growth methodology in force, all value investors should reconsider their core investing tenants. And it’s true; we don’t know if he was the one that decided to invest in Snowflake. It could have been one of his heirs to the Berkshire throne.

And I don’t know if Buffett or Berkshire is moving away from value investing. But the company is certainly moving toward growth investing. And that should make every investor wonder why.

And one clear reason is that those who have invested with a growth strategy have performed incredibly well. Not all, of course. But many. Anyone who invested in Amazon, Netflix, and Google early vastly outperformed the market. It seems that Berkshire doesn’t want to lose out on future companies like those. For instance, they had the chance to invest in Google when it IPO’d but turn it down because they thought it was too expensive at $24 billion. Now Google makes that in yearly revenue. And Berkshire doesn’t want to make that mistake again.

Also, for growth investors, this shift is good news. It means there will be more capital, more eyeballs, more people rushing to get into growth companies. That will buoy the entire stock market, especially for technology-based, high growth companies with an edge, playing in a large market, like Snowflake. That means prices for these stocks will likely go up faster and higher with greater multiples than before. We already see that. Snowflake is a perfect example, by rising 100% on day one of trading. And it’s continuing to rise, and there’s no telling when it’s going to stop. It probably won’t for a very long time.

Of course, not every technology stock wins. Not every platform grows and dominates. There are losers. Look at Quibi. So every investor must be careful, shrewd, diligent. We’ve all got to do our homework. And really, I don’t know if every company will have crazy high multiples and that investors will always tolerate super expensive investments. But for the foreseeable future, they will. They already are, even Berkshire.

And this, I believe, is only the beginning.

For a giant has awoken.


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Why I Sold My Uber and Lyft Stock at a Loss

People love to talk about buying winners because sharing your losers sucks. But every investor experiences them. I have with Uber and Lyft. And I’m going to talk about them now.  

Selling a stock can be just as hard as buying one, sometimes harder. That is especially true when we’re losing money. We can get weirdly attached to a stock and resistant to let it go, even if we know it’s the best decision. Doing that would mean we have to admit that we were wrong and other weird psychological phenomena that I won’t get into here. 

Taking a Loss in My Uber and Lyft Stock

Last week I sold my small positions in the ride-hailing companies, Uber and Lyft, at a loss. The latter was the larger position, which also lost more money. I think it was down over 50%, maybe closer to 75%. No matter how you look at it, those numbers are ugly. Uber was much smaller, maybe less than 5%, but still a loser. And the saving grace was that they were smaller positions, meaning I invested a relatively small amount of money in them, making them smaller losers. But, to me, they still felt big. Everyone hates losing money. At least I do.

Why I Sold Them

The reason I sold them wasn’t because I’m masochistic or have some fetish with losing money, no. Rather, I felt like these companies were losing because the industry was going to struggle for the foreseeable future. I’ve held on to losing stocks before. But many of them started to swing positive, eventually. Some took longer than others. But these never did. With the pandemic, I think it will be long before people start using drivers in mass. 

And regulation is coming down. California tried to create a law where these companies’ drivers will be treated as employees, which didn’t ultimately succeed since Uber and Lyft threatened to shut down their California operations. So the state relented, for now. But stricter laws that protect the drivers looks inevitable in California. And it could spread to other states. 

There is still value in Uber and Lyft. People will still use them. People will still drive for them. It is a solid business model. But the scalability, I believe, has lessened. Much of the growth has happened. And the investors who captured most of the most valuable upside were the private ones who bought in before the IPO.

Even With Headwinds, There Is Still Potential

There is still the delivery services, and it appears to be making great headway even with headwinds, replacing the revenue it had in rides, at least for Uber. And that sets up a great scenario where they will potentially have two great revenue sources after the pandemic. And there is a growth story there. 

And Lyft looks like they are offering the same service, but I don’t see how well they are doing in it and if they’ve been able to be as successful in pivoting as Uber has. And that lack of visibility may be the reason its stock has performed more poorly than Uber’s.

Also, Uber does have a great CEO, with Dara Khosrowshahi, who left Expedia to take over after Uber’s co-founder, Travis Kalanick, was ousted. But even the greatest CEO would have difficulty navigating a business where a business model dependent on travel is pitted against a pandemic that has kept people sheltered like hermits. Khosrowshahi is a great business leader, but even he has his limitations. 

In the long long run, I think they will do well. People need rides; they will need to go to the airport. City dwellers will want to live without cars and have the convenience of just tapping on their phone and getting picked up and schlepped to their destination on their steel chariot. That trend is not going away. It will only grow. But it will take time.

But I don’t think it’s worth waiting.

Closing Thoughts About Selling Tech Stocks

Sometimes it’s best to exit an investment, even at a loss, to get into ones that you believe will have a higher degree of success in the short and long term. The keyword in that sentence is “higher.” 

Money is a resource. And if we allocate it in the right vehicle, it can fly to far great heights than you ever imagined it could. That 50% loss can be recovered in less than a year, and you can start having a positive investment soon after that. That is especially true with technology stocks.

Because, often, staying in losing positions makes you lose the opportunity to find winners. See, just because you’re losing doesn’t mean you’ve lost. 

Sometimes, you just have to admit you’re wrong, push through the pain of selling at a loss, and find the winner that can give you bigger gains than you thought you could produce. 

Sometimes, to win, first you’ve got to lose. 


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Changing My Mind About Tesla

It took me two years to change my mind about Tesla.

I didn’t invest in it. And it wasn’t the price going up that kept me from investing. It wasn’t the production delays. It wasn’t the sky-high market value. Not, it was this. 

A story. 

Why I Didn’t Invest in Tesla

A couple of years ago, I thought about investing in Tesla even though I heard about how expensive it was and how there were so many shorters shorting the stock (which means people were betting that Tesla’s stock price would go down). But I didn’t. 

Right around the time I was thinking about the company that makes those sexy electric vehicles rolling that everyone wanted, I heard a podcast that changed everything. I don’t remember the interviewee’s name. But I do remember what he said: He was convinced that Tesla was a fraud and that it would go down and he was certain. 

And you know what it did to me? It scared the crap out me and I didn’t invest. 

The stock has gone up over 800% from just last year. And I missed one of the greatest investment opportunities to bet on one of the most innovative entrepreneurs ever to live.

See, that’s the thing about negative stories: They’re so believable. No one wants to look stupid and buy a loser or make a mistake, and, certainly, everyone hates losing money. And when you see a stock that seems too good to be true, and then you hear an “expert” say that it’s a fraud, that sticks with you. The thing about a story is that they are sticky. 

But eventually, I got unstuck. 

Looking at Tesla Afresh

So, what changed my mind? It was the Gigafactory that came online in Shanghai. I saw a headline on it and it shook something inside of me and made me question my stance against Tesla. And I started to trace the reasons why I didn’t invest in it and I remembered the podcast. 

After I realized how much I let that podcast affect me, 

I started to think and look at Tesla afresh. I saw that it was the premier electric vehicle company, led by one of the greatest entrepreneurs ever. And I feel a little uncomfortable using such superlatives, but I don’t think I’m exaggerating. 

It’s vertically integrated, trying to control the whole production and manufacturing stack. That sets it apart from American auto manufacturers. Tesla can control its quality and destiny for years, decades to come. And that’s not even mentioning that Elon Musk did what most people thought was impossible: He created another American mass-production auto manufacturer, which hasn’t been done in a century.

See, that’s the thing about a company like Tesla, when you talk about its accomplishments, it does sound like exaggerations, a string of superlatives that almost seem too good to be true. 

But that’s because Tesla is superlative. It’s so great, it feels too good to be true. 

The Foolishness in Investing

And that’s the thing about investing: you’ve got to be foolish enough to bet on the it’ s-too-good-to-be-true-investments because that’s where the real growth is. See, it’s tough to be a great investor and be pessimistic. You need to be optimistic to bet on the companies that will innovate and change the world. It’s those moonshot companies that do that thing that everyone says “can’t be done,” because it’s too hard or no one has ever done it or whatever. But they give us the best returns. 

That’s Tesla. They’ve done the impossible. They’ve built the next American automotive manufacturer; they’ve scaled their business; they’ve become profitable. They’re beating the odds. Optimism often wins.

Yes, price matters. You need to invest at the right price. But how do you price a unique item like a rare gem, or a Van Gogh water lily painting, or a company that’s not like any other? That’s the problem here, with Tesla. It’s not like many, or really any, other company. That doesn’t mean it will hold its price or there won’t be volatility or drawdowns. No, there will be. But that doesn’t mean that ten years from now it won’t be more valuable. So I don’t have a great answer for the pricing; it’s a conundrum. 

Closing Thoughts on Tesla

But ten years from now, I do think Tesla, as a company, will be worth far more than it is now. It will possess all of that institutional knowledge, expertise, grit, scale, technologies, and innovative culture. And how much harder will it be for another manufacturer to catch up to them? Sure, one, let’s say a Chinese manufacturer, will have a lot of those qualities, but it’s unlikely they’ll have the quality and the mystique that Tesla has. I doubt they will have the magic. Tesla doesn’t just make cars. They make art on wheels. 

And then it’s not hard to think about the future and wonder who will catch up to Tesla? If it was that hard to create a mass car manufacturer, which no one has done for over a century, how will anyone create one that will compete with Tesla? Because they didn’t just make a company and build a manufacturer that makes good cars; they created one that makes great cars, ones that people die for, lust after, aspire to. Musk didn’t just build the impossible, a new auto manufacturer; he also created a timeless brand. 

So, yeah, I thought to myself about myself, “You’re an idiot for listening to someone else and not investing in one of the most iconic brands that accomplished the impossible and created one of the most desired products ever.”

That’s the story I believe now. 

So I invested. It happened about two weeks ago.

I’m up 3%. 


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Snapchat: The Stock You Should Seriously Look At

Snapchat’s stock (SNAP) is easily overlooked, but shouldn’t be.

It may look like just a silly app, but, really, they mean serious business.

Yes, it’s got these ridiculous videos and filters you can put on your face that make you look like an old person or a bunny or a fire god; and it feels like if you put a circus in app form, you would get Snapchat.

But really, it’s a visual innovation powerhouse that’s worth your attention.

Misunderstanding SNAP Is an Opportunity

Snapchat has struggled these last few years as an investment. After it’s IPO, it dipped, a lot. There are some good reasons for that. It’s not profitable. They made some design changes that got push back from key users. And I think the biggest reason for its lagging price is that many investors just don’t understand it. It’s too silly, too childish, too weird.

But just because you don’t understand something doesn’t make it a poor investment. Often that makes it an opportunity. If you don’t comprehend it, that often means others won’t either. When investors don’t understand a company that is doing innovative work and has a diehard fan base, it’s an opportune investment.

Snapchat’s Users Love It

Yes, it might be like a circus, but young people love circuses. Snapchat’s audience is young, but they love the app. 69% of 13-17 year olds use the app. And teens say it’s the most important social media app they use.

Snapchat has also improved the amount they monetize on their audience from 32 cents in 2016 to about $2 in June 2020. That’s 6X growth in revenue per user in four years.

And maybe you’re hung up on the idea of them being unprofitable. But many great companies had the same issue, for years, like Amazon, Netflix, Google, Facebook, etc. But they turned out pretty ok. And I don’t know if Snapchat will become as big as those companies, but it’s not impossible. It’s not like Snapchat doesn’t have a user base and that it doesn’t have revenue. It has both. But Snapchat is also focused on something else, something more. It’s innovating.

SNAP’s Power of Augmented Reality and Video

They have quietly built one of the greatest augmented reality companies in existence. Those crazy face filters, yeah, that’s AR. They have dozens and dozens of them, hundreds, and they are creating more. And those filters aren’t just for faces of people but the faces of places, for iconic landmarks like the Eiffel Tower. Snapchat is also empowering its users to use AR to create on places everywhere. They are literally changing the way people are engaging the world with their devices.

Not only that, but it’s also building an enormous mobile-first video library that’s entertaining its audience. They don’t just have user-generated content, which is rich and produced by a very engaged user base, where 60% of their users create content, whereas only 10% of Twitter’s users create 80% of the content. Snapchat also has it’s own Snapchat Originals, which is content that the company produces.

The pandemic is making technology like this even more powerful, useful, and essential. Since it’s harder and more dangerous to engage physically, people use digital tools to connect, communicate, and share. Snapchat is at the forefront of that, especially for young people.

And all of that points to one thing: value. Snapchat is becoming more valuable. And it’s getting bigger and more prominent, but it’s within a population of people investors often overlook—kids.

Snapchat and Tencent

But Tencent hasn’t. You might know Tencent by the headlines it’s getting these days for being a Chinese tech giant that the Whitehouse is trying to fight against in its battle with China. Tencent is one of the world’s biggest tech companies and has been making investments in all kinds of companies like Riot Games, Epic Games, and Tesla. As of 2017, it holds a 12% stake in Snapchat. Tencent understands the future is more than just writing posts and posting pictures of our kids on their first day of school on platforms. It will be more creative, digitally rich, and richly integrated between the digital and physical worlds.

Tencent is betting on the Metaverse. The Metaverse is the idea that eventually, technology will become so advanced that we will live in the digital world almost seamlessly with the physical one. We will shop, attend concerts with friends, date, see a doctor all online, virtually or with augmented reality, or some combination. And when we are walking around in the physical world, we will see digital realities, like advertisements or videos or murals and art all over through augmented reality. And this digital world, some believe, will be worth trillions.

Closing Thoughts on Investing in Snapchat

Snapchat is at the tip of this movement. With their deep investing in AR and the user base that is already using their platform to create these realities, they have the makings of not just possessing staying power but changing power. They have the capacity and the eventual makings of being on the cusp of making the future of technology and how humans will interact with it.

They are creating the future today.

Yes, no one really knows what tomorrow will hold. But it’s often a good idea to bet on companies who create the future instead of letting it be created for them.

At least, it’s time to see Snapchat afresh.


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