Emotional Investing 2.0: Be Quick, But Not in a Hurry

Chris: This is Chris Perras, Chief Investment Officer at Oak Harvest Financial Group, bringing you the February 8th edition of Keeping You Connected to Your Money. Each week, we try to recap the prior week’s events and share with you our views, and thoughts on what’s in store for the market ahead. This week, I want to title our segment, Emotional Investing 2.0, quote, Be Quick, but Not in a Hurry.

I didn’t understand what that phrase meant when I was 16 years old when I heard it for the first time on the basketball court from one of my old basketball coaches. It took me almost 20 years to understand it and start dealing with the public equity markets.

I want to give you an example, a real-life example that saw here this week at Oak Harvest and try to educate you into what we look for in a company and when we want to sell a company, and when we want to panic. On Monday, this company called Electronic Arts which many of you are aware of, and they’re known from their games that operate largely in the sports field. They’ve produced Madden football, and a number of MLB games, and some FIFA Soccer World Cup games.

They were out to report earnings this week. On Monday, the stock was trading at $89, supposed to report on Tuesday, the stock traded up to $93, the stock is halted as all stocks are for earnings report. The company came out, beat numbers by about a penny, and then they reduced their guidance for 2019 which we were holding it, expecting. Apparently, there were some people, they’re largely referred to as pajama traders by a couple of analysts on TV that had not been expecting it.

They traded the stock down from $93 to $74.75 in a span of one hour, that’s with nothing else, except for a press release from the company. No conference call by management, no analysis, no nothing. You turn on CNBC in the after-hours and you listen to some of the moderators. They basically said it’s one of the worst quarters they’ve seen all quarter. They were stating it’s the death of the online gaming business.

They moved on, literally wrote off both Electronic Arts, Take-Two Interactive, and Activision, two old companies never going to grow again. They did that in less than 12 hours. This morning, Friday morning, 36 hours later, the company announced that one of their games called Apex Legend is the number one game on Twitch. I mentioned Twitch because I’m going to follow up on that a little later.

It has 10 million people playing the game, and at one time, they’ve had 1 million playing it concurrently, 1 million people playing the same game throughout the world. On that news, the stock rose all the way from $80 back to $96. It is Friday. On the span of five days, the stock traded at $89 on Monday, $93 on Tuesday, $75 on Wednesday, $80 to $83 on Thursday, and today it hit $96.

Someone was clearly in a hurry to sell the stock for reasons I cannot understand as low as $75. We still own the stock, we look at this year as being a recovery year for the company, are very optimistic on what’s going on there. That platform that I just mentioned called Twitch, it is one of the biggest platforms for gamers and other people viewing video in the world. They’re comparable to a YouTube.

They have 2.2 million broadcasters a month. They have 15 million people using their service daily. The reason I bring this up called Twitch and most people over the age of probably 40 have never heard of it, is the company Twitch, in 2014 was sold for about a billion dollars. It was sold to a company that most of us know really, really well, and that company is Amazon. Today, Amazon was in the news because Jeff Bezos, who most of you know who follow the news, has decided to have the most expensive divorce in the world, decided he no longer wanted to be married to his soon-to-be ex-wife.

They’re splitting up the holdings in Amazon. It comes to roughly $65 billion to him and $65 billion to her. There’s a lot in the press today about how that divorce is going to affect Amazon. Now, he’s potentially suing the National Enquirer on how much time that’s going to take away from him at Amazon. We do not think it’s going to take any time away from Amazon. Amazon’s stock while it’s down 22% from its all-time high, we actually came into the stock today for the first time in quite some time and bought it for our clients who are looking for growth in their portfolios. We think that Amazon’s next big deal is going to be the advertising market.

It’s already growing very rapidly within their company. You can’t really see it because they don’t break it out fully, but we think that that is going to be probably the fourth stool of growth in Amazon. Platforms like Twitch that people spend hours a day on, Amazon will turn around and create advertising dollars and revenue out of people playing games on this system called Twitch.

I just wanted to bring those two stocks up as examples of how we are trying to take advantage of other people’s emotions ruling the day and creating opportunities in the stock market, being slow sometimes to wait, and wait two months, three months, four months to slowly invest your money to get it repositioned, that’s the way we do things here at Oak Harvest.

When volatility picks up and spice like it did in December, will accelerate the investment process because volatility breeds opportunity. Once again, I want to ask you like I did last week, if you find these podcasts at all helpful, please feel free to forward them on to many friends, or go ahead and direct them to our website. We’ve been updating some content on the website. The look is new, the website once again is oakharvestfg, as in a financial group.com.

Please send any of your friends who you think might be of interest to the website. These podcasts will it be available in the future right there, you’ll be able to click on them. One, two, three, go back as many weeks as you want and see what we were saying weeks ago, compare against what the market had done, or if volatility was lower because of certain events that we had said were coming. Go back. We’re not going to be perfect, but we’re just trying to keep you in touch with what we’re thinking here along the way.

Once again, this is Chris Perras with Oak Harvest Financial Group. Many blessings and have a great weekend.

Speaker 1: Content contained within this Oak Harvest podcast is for informational purposes only, and is based upon information current as at the time of recording. It should not be considered an offer or solicitation to buy or sell securities, nor is it tax or legal advice. Investments involve risk. Unless otherwise stated, particular investment returns are not guaranteed.