Roaring Kitty has returned, and so have the memes.
GameStop stock is also back, currently up 69%.
Qualtrum notes this miraculous surge in GameStop is due to a
social media post by Roaring Kitty.
And Gamestops. Not the only stock up today.
Other meme stocks like AMC is up 41% today, again because of a
post from Roaring Kitty. Now, in case you missed the last
go around and you're somehow new to the market, Roaring Kitty has
become a bit of a legend. I also.
Believe the current price of the shares demonstrates that I've
been right about the company. A few things I'm not, I'm not a
cat. I'm not an institutional
investor. And that's right.
This is really him being summoned in front of Congress,
talking directly to a congressional committee
clarifying that he's not a cat. This story was soon made into a
movie called Dumb Money where it shows how he was a you tuber
that started making videos on GameStop.
His thesis was he believed the company was undervalued.
It became legend and started to get spread across social media,
primarily Reddit, while a bunch of hedge funds, specifically
Melvin Capital, were short. GameStop Roaring Kitty and his
crew of memsters decided to go along the stock and not only go
along it, but they pushed the price up through every means
possible, through leverage and through options, causing an epic
short squeeze where Melvin Capital lost billions of dollars
on this one single position and forcing them to shut down.
Now, many people saw the movie that depicted all of these
events. It was called Dumb Money, and it
even trended on Netflix getting up to the top ten watch movies
of the day. But after the movie, it seemed
like events started to simmer down a bit.
Keith Gill, the person behind Roaring Kitty, was reportedly
worth $50 million. He had one of the best trades of
all time, turning $50,000 into 50 million, and while it seemed
like he was done, $50 million after all, is far past
retirement money. He can basically do anything he
wants. And after all of these events,
for the next three years, we didn't hear anything.
Roaring Kitty, After this epic battle between retail investors,
dumb money and the hedge funds, played out to the ultimate
victory of the retail investors, it seemed like Roaring Kitty had
moved on. He'd accomplished his goal, he's
made himself very wealthy in the process, and things went dark
for a while. Roaring Kitty didn't post at all
on social media. He didn't post until he did.
After three long years, Roaring Kitty made his first tweet and
it was this. An image of a gamer going from a
relaxed position into focusing mode, leaning forward with
intention and concentration. This post alone was viewed
17,000,000 times. So far has 10,000 comments and
83,000 likes. But after this post, it didn't
stop there. Roaring Kitty has been putting
out every minute a stream of fresh memes for the community to
devour. Only an hour later, he posted
this. Fine, I'll do it myself.
Oh, Oh yeah. Let's go.
He's splicing together Marvel films and X-Men and overlaying
music to show that he's back. Now we don't know exactly what's
going on or what his specific intentions are, but we know one
things for certain, meme stocks are back, and today they're back
in a very big way. I think in the spirit of meme
stocks, we're going to look over the fundamentals of GameStop and
we can look at how this company's been developing over
the past three years. Now of course, we also have some
breaking news on the AI front. We have Sam Altman, the leader
of Open AI. They're currently having their
Open AI Developer day. We're going to take a look at
all the new stuff that Open AI has been working on.
We also had some breaking news from Bloomberg that Apple is
nearing a deal to work directly with Open AI to put ChatGPT on
the iPhone. We'll be going over the
specifics of this deal, how this would work in the iPhone and my
thoughts on how this would affect Apple stock.
And then finally, we also have some news that S&P Global, well,
there's rumors that S&P Global is looking to sell off their
mobility unit. We'll take a look at S&P Global
and see how selling off that one unit of business could impact
the company. So obviously this is going to be
a very full episode. If you like this type of
content, make sure you subscribe to the channel.
Now for those of you that are new here, this is a long term
value oriented investing channel where I buy companies that I
consider to be the best companies in the world.
I have an entire investment philosophy that I've outlined
over an 8 page PDF. You can download this for free
and part of it I outline that I buy compounding machines.
Compounding machines are the most dominant, powerful
companies in the world that have unassailable moats, and they
have incredible organic growth. I highlight the attributes that
I look for in these specific companies.
I buy a concentrated collection of them in this single portfolio
and reinvest back into them during any dip.
The purchases that I've made recently in the financial
category are all going in the right direction.
These companies compound their free cash flow per share and
their earnings per share and their stock price eventually
follows. In the tech category you find
some more traditional tech companies.
I like big tech and I've been overweight big tech for years.
In this portfolio I've held Apple and Microsoft for around
five years and in both of them I have around the same return,
$24,300. A new addition to the portfolio
is Salesforce. I just recently bought into this
one this year. I'm still confident over time
that my Salesforce by will prove to be an attractive one.
I bought into world class restaurants, ones that are
taking market share from other ones that aren't operated or
managed in the same way. In the consumer category.
I only have one retail stock, which is Costco.
Costco is a very unique retailer.
It's a company that's gone up to an incredibly high valuation,
but I still hang on to this one because given the fullness of
time, I still believe that Costco will be a prized asset
across the world in real estate. I also hold only one company,
Vici Properties, which owns the majority of the Vegas Strip.
It's a very simple company, but the returns on this one have
been diminished by rising interest rates.
And then in the smallest category we have the
industrials. I believe Canadian Pacific is
the best option out of all the Class 1 railroads.
It has the most significant growth and I believe it has the
best leadership. The commonality between these
holdings is the fundamentals behind them.
Not only do these companies have great stories, you can attach
great narratives of long term secular growth, of great
leadership of great products and services, but they also have the
fundamentals to back it up. When you look over these
companies, you come to the conclusion that they're all very
strong companies and I believe that's led to the success in
this portfolio and the performance so far.
But I realize that not everyone wants to invest like I do, and
some people have more of a gambling spirit and right now
the gambling spirit is coming back.
CNBC has recently highlighted the eagerness of market
participants to get back into high risk positions.
Meme stocks and options are back.
Zero days to expire options have climbed in popularity among
everyday investors. These are one day bets on the
direction of the market, which can offer outsized returns,
rewards and also outsized risk. Last week, retail activity and
zero DTE options, as they're known, saw the biggest weekly
sales since the beginning of the year.
That's according to JP Morgan. Investors are increasingly
betting on one day options, meaning the investors are
betting on the price a stock will trade within a single day.
Now you can call this gambling, and I think that's the
appropriate term for it because when you're betting on a stock
to rise 20 or 30% in a single day, unless you have very solid
reason to bet on that, it's a gamble.
And in most cases investors that are chasing these high risk
plays like the mean stocks are simply gambling.
But I don't believe they're the only ones gambling in these
positions. If we look at GameStop and see
what's happened over the past three years, it paints a picture
of the fundamentals. The revenue since 2020 has gone
from 6 billion down to 5 billion.
Now. I actually consider that pretty
good. It's declined, but not quite as
much as I would have anticipated.
I would have assumed that Gamestop's revenue would be
falling faster. The free cash flow is all over
the place, some years slightly positive and then some years a
big negative. But overall the free cash flow
does look negative. GameStop still has a lot of
cash. They have $1.2 billion with only
capital leases to pay. So GameStop has time.
Even if they're not making they can operate for years before
they run into real issues. This company has no significant
Moat and competitors like Amazon are slowly eating away at their
market share. But GameStop is still surviving
and they're not going to go out of business anytime soon.
So it is true that these aren't really investors investing in
GameStop. These are gamblers.
The same type of gambling spirit that you would have at a sports
game or at the Kentucky Derby is being brought to GameStop.
But they're not the only ones gambling on this stock, because
surprising enough, as if Wall Street has not learned its
lesson, there are still huge funds shorting GameStop.
In fact, GameStop is one of the most heavily shorted stocks in
the market. GameStop has a percentage of
float that's short at 24%, and this is what I really can't
understand. Who in their right mind thinks
it's a good idea to short GameStop?
What fund manager is making that decision?
What individual investor is making that decision?
You're shorting a company that's known for its incredibly
explosive meme potential and its history of causing the implosion
of one of the most well backed hedge funds in the market.
They already destroyed Melvin Capital, but it seems like Wall
Street hasn't had enough. It seems like they need to get
their hands slapped again. AM CS not a good business and
it's a company struggling with long term secular trends of
streaming. So it's a stock that attracts
short investors, people that want to hedge their portfolio
with some type of instrument to go short on.
And many of them are inevitably picking AMC as a go to short.
AMC currently has around 19% of their float short.
Now again, who is it that thinks this is the stock to short?
Sure, the fundamentals look terrible.
Sure, the valuation could go down.
There's a short thesis for it. But you have to put that in
context of this being one of the few stocks that has incredibly
explosive meme potential. If you're shorting AMC or GME,
you're playing with fire. You're not just playing with
fire, you're playing with dynamite.
One wrong move and you blow yourself up.
I understand what the meme investors are doing.
I understand the apes investing in AMC.
They don't care about the fundamentals.
They want to stick it to the hedge funds.
That makes sense. Their story is clear.
Their intentions are clear. What I don't understand is the
possible rationale for an institutional investor for a
large fund to take yet another short position on a stock where
one ominous tweet by one person can send that stock up 100%.
In this situation, the dumb money is not the retail
investors or the apes or the people investing in these
companies with poor fundamentals.
The dumb money is the institutional investors, the
ones that think it's a good calculation to take a short
position on stocks with this type of explosive online social
media attention. So out of all the dumbest
investors in the world, at the very top of that list right now
are the ones shorting GameStop. Now moving on, we finally have
the demo from Open AI. This is something that was
long-awaited. A lot of people want to see the
next iteration of Open AI and they time this demo right before
Google's IO developer conference.
So they're trying to take some Thunder from Google, which is of
course one of their primary AI competitors.
Now, I did watch the whole demo beginning to end.
I watched all of the different things that they showed and
overall I think it was a pretty good iteration.
I thought it was a pretty good demo of the different
capabilities. The one thing that they're
really leaning into more than anything is basically trying to
copy the movie her. Have you ever seen that movie?
It has Joaquin Phoenix as a main character and he's kind of like
a lonely guy, you know, he he's by himself.
And then he gets an OS, an operating system that has an
artificial intelligence companion.
It's like his new girlfriend. He actually starts to fall in
love with her. And she's voiced by Scarlett
Johansson. So you can imagine Joaquin
Phoenix forming a relationship with an artificial intelligence
operating system that is in the voice of Scarlett Johansson in
this movie, which was complete fiction and something you
thought, oh, maybe that will happen one day.
Well, it seems like that's starting to happen and maybe
sooner than we think. Here's a live demo of the new
Open AI technology and notice the similarities.
Hey, how's it going? Hey there, It's going great.
How about you? I see you're rocking an open AI
hoodie. Nice choice.
What's up with that ceiling about?
Are you in a cool industry style office or something?
Now, right off the bat, you may question that he's talking to a
real human and he's not. That is AI.
And you'll notice that different donations, the conversational
style. She sounds a little bit almost
sultry, like she's a little bit flirting with him to some
degree. The whole conversation seems way
more organic than anything we've heard.
It's like they took Siri, which sounds very robotic, very
rudimentary, and they took that to a whole new level.
Well, can you take a guess at what I might be doing based on
what I'm showing you here? Hmm.
From what I can see, it looks like you're in some kind of
recording or production set up with those lights, tripods, and
possibly a mic. It seems like you might be
gearing up to shoot a video or maybe even a live stream.
Yeah. In fact, we've got a new
announcement to make. That's exciting.
Announcements are always a big deal.
Judging by the set up, it looks like it's going to be quite the
professional production. Is this announcement related to
Open AI? Perhaps it is.
And in fact, what if I were to say that you're related to the
announcement or that you are the announcement?
Me. The announcement is about me.
Well, color me intrigued. Are you about to reveal
something about AI, or more specifically, about me?
As a part of Open AI, you've got me on the edge of my well, I
don't really have a seat, but you get the idea.
What's the big news? What this reminds me of was
Google's Gemini demo that they originally did, where they tried
to show off how conversational it was.
We found out a day later that a lot of that was prerecorded and
prerehearsed, so it was immediately not as impressive as
we thought. Now, Open AI may be doing the
same thing, but we have no evidence to believe that so far
from what they tell us. This is a live demo.
Mike. Mike She wonders.
If whales could talk, what would they tell us?
They might ask how do we solve linear equations?
There it is, taking the 2 languages and seamlessly
translating it back and forth, which granted, that is something
we've seen before with different tools.
Google can do that, for example, But this sounds far more organic
and it seems to work more seamlessly than what we've seen
so far. They also illustrated how now
they can actually use the camera and it has video mode.
Here he is writing down a math equation and he has the Chachi
BT4 camera pointed at the equation.
Ah, I see it now. You wrote down three X + 1 = 4.
Again, this is another illustration of the similar type
of thing we saw Google try to do a couple months ago, but they
completely botched their demo. It was illustrated right after
Google did their demo that a lot of it was prerecorded.
So it seems like Open AI is doing a lot of the same things,
but it's also improved a little bit on top of that.
And unless their demo turns out to be fake, unless we have some
breaking news that Open AI completely fabricated this demo,
it seems like they're doing this for real now.
There was rumors that Open AI was going to announce a direct
competitor to Google. Those rumors quickly dissipated
when Sam announced that he's not announcing A competitor to
Google. So no competitor to Google in
this Open AI conference. But even though they're not
competing with Google, they may become allies with Apple.
We had some breaking news over the weekend that Apple's
narrowing a deal with Open AI to put ChatGPT on the iPhone.
Now in this developer conference, they said nothing
about this deal. So this is completely a rumor,
and they're not commenting on it.
But we know from different sources that this deal, this
potential deal is getting close. They say that Apple would be
doing this deal in a broader push to bring artificial
intelligence features to its devices.
And we know this has been a stated goal from Tim Cook.
He says that he's leaning in to artificial intelligence.
The two sides have been finalizing terms for a pact to
use ChatGPT features in Apple's iOS 18, the next iPhone
operating system. Apple also held talks with
Google about licensing that company's Gemini chat bot, but
those discussions haven't led to an agreement.
Now, there's a lot of speculation of why didn't Apple
move in with this agreement with Google, and I have a couple
different ideas, a couple different things that I think
could impact the decision. The first reason that I believe
Apple would choose to partner with ChatGPT over Google is
because Apple already has a significant and lucrative
agreement with Google over defaulting their search engine.
And think about this for a minute.
If Google also not only had their defaulted search engine,
but was also licensing all of their AI to Apple, that's
another huge agreement with these two companies, and the
first agreement's already under government scrutiny.
Google's such a big company and Apple's such a big company that
any big agreements they do together is going to raise the
attention of regulators. So I believe one of the
potential reasons that Apple may avoid doing further deals with
Google is simply to avoid greater regulation.
The other thing that I think could be a reason is because
Apple is, after all, competitors with Google.
They don't want Google to singularly become too powerful
and become too dependent on them.
By doing a deal with a different company, they diversified the
different companies that have power in this territory.
If this deal goes through, it would feed a tremendous amount
of data to Open AI. All these billions of devices
that Apple has now feeding new information to Open AI to better
train their models. Now of course, the ultimate
reason that they're leaning in on Open AI over Google is
unclear, and this is all speculation.
Both the companies, Open AI and Apple, declined to comment on
these rumors. Apple stock is rising after this
potential agreement and I think for good reason.
So far we've heard more and more negative news for Apple, greater
and greater regulatory oversight.
We've also had Warren Buffett trimming his position and the
stock at more of a full valuation.
And this news with a potential, a ideal seems like a real game
changer. This is something that could
uniquely strengthen the Moat and the ecosystem of Apple.
The ecosystem of Apple is the mode of Apple.
As long as they have their seamless integration and their
ecosystem where their devices work Better Together than apart,
the company will continue to flourish.
If the ecosystem gets torn down, ripped apart, the devices no
longer work seamlessly with each other, then Apple no longer can
protect its growth path. And I view this potential deal
with Open AI as a positive iteration with their ecosystem.
I think this actually has a bigger potential impact on Apple
and the future of the stock then their new Apple Vision Pro
headset. So overall I think Apple's a
winner in this and if this deal goes through I think Google
unfortunately is a small loser in this situation.
Now finally we get to one of my largest positions and a move
that they may be making. S&P Global is currently my very
biggest position, an $89,000 holding.
Apparently the rumor is that there's three different people
with knowledge of the matter, so they have three different
insiders that have leaked that they're weighing the option of
selling the mobility business. Including a full sale.
So the entire segment, they're weighing, selling that off.
They say that they might sell it to private equity firms that
have expressed interest in the unit.
And S&P Global themselves do not feel that the mobility segment
is a core part of their business.
So again, there's nothing set in stone here, but we know from
three different insiders that this is a possibility.
Now again, if we look at these segments of business, the
mobility business is the one they're considering selling.
If we look at this business in isolation, it is the smallest of
all their different businesses and they recently acquired it in
a transaction in 2021. So this is a part of the
business where again it's focused around cars and they own
a website like Carfax. And I agree that I don't think
it's the most significant or important part of their
strategy. There's a lot of different
things S&P Global could do with the $12 billion they get from
the proceeds. For example, they could pay down
a lot of their long term debt, but I don't think they're going
to do that. I believe the reason the S&P
Global isn't paying down their debt is because a huge majority
of it is financed at around 3%. They have an incredibly low
interest rate on their debt. They could make more money just
investing in treasuries, so I don't think they're going to use
the money to pay down debt, but they can certainly put it to use
other places. Now again, I don't know exactly
if they're going to do this deal, but if they are, it's
something I'm OK with. I don't see any problems with
them selling off mobility. It's not a core part of the
business. It's not what I consider the
most attractive parts of the business.
Now I would be concerned if they were selling off the indices
business or the market intelligence or the ratings.
Those are three segments of business that I consider to be
very important to their future. I believe commodity insights and
mobility aren't quite as important, but we'll keep an eye
out of how this develops and see what they ultimately decide to
do. Now that's all for this episode.
If you want to see more content like this with real investing,
Real news, make sure you subscribe to the channel.
Other than that, I'll see you in the next one.