With NVIDIA (NVDA 2.94%), Western Digital (WDC 5.31%), and Micron Technology (MU 6.68%) all falling in recent days, are chipmakers a buying opportunity or should investors stay away?
In this episode of the MarketFoolery podcast, host Chris Hill and Motley Fool contributor Bill Mann analyze the landscape as we dip into the Fool Mailbag. Plus, we discuss Amazon's (AMZN 2.61%) missed opportunity, SurveyMonkey's (SVMK +0.00%) first report as a public company, and National Pickle Day!
A full transcript follows the video.
This video was recorded on Nov. 14, 2018.
Chris Hill: It's Wednesday, November 14th. Welcome to Market Foolery! I'm Chris Hill. Joining me in studio today, the one and only Bill Mann.
Bill Mann: How are you?
Hill: I'm looking at the sweater you're wearing and I'm thinking of the impending winter weather we're about to get. And I'm slightly jealous on a clothing level, but other than that I'm good.
Mann: This is a Stitch Fix sweater. I've been getting the boxes from Stitch Fix.
Hill: They're doing you right.
Mann: Thank you! I appreciate it. It's warm.
Hill: We're going to dip into the Fool mailbag. We're going to get to some earnings news. Let's start, though, with the story that we led with yesterday. I'm curious your perspective on this. This is, of course, Amazon and the ... I'm not calling it a second headquarters, because there's more than one. Their new satellite offices in New York and Crystal City.
Mann: First of all, I guess I have to eat a little bit of crow. I was on the show a long time ago saying it was going to be Atlanta.
Hill: We went around the table, we made our predictions, and you were highly confident it was going to be Atlanta. Not a bad way to bet.
Mann: I have a close friend who was at AWS, and told me early on that it was Atlanta's to lose. So, I went with that. Took that received wisdom and ran very confidently with it. I didn't actually have inside information on where it was going to be. I'm not particularly surprised that it was Northern Virginia. I'm also not particularly surprised it was New York. But after the process, I'm a little surprised it was both.
Hill: Yeah, it's a little surprising. I guess because we've been following this, we're closer to this story than the average person is, so I shouldn't be, but I'm a little surprised by the wailing and gnashing of teeth of the tax incentives that were put forth by New York and Virginia. The reason I'm a little surprised is because they are both dwarfed by the reported amounts of tax breaks that were being offered by the likes of multiple other states -- including, by the way, Maryland.
Mann: Yeah. That tells me that, from the outset, it was New York's and Northern Virginia's to lose. I don't know. I find that the theory of tax breaks don't often hold up to the reality that it tends to be corporate welfare. But the belief is there are going to be some high-paying jobs, and that makes people happy. That gets governors reelected. I guess not in Virginia, since we're a one-term state, but whatever! Let's move on with the theory.
Hill: No, I think you're right about that. You tweeted something to this effect earlier today. This is not like Amazon is going into a depressed area. This is not Amazon single-handedly going into a place where it's like, "Now people are going to move there." Yes, in theory, some people will move to New York and Northern Virginia for these jobs.
Mann: People who are there freaked out. New York, in particular. They're like, "We have the highest cost of living in the country. Why here?" I really feel like Amazon, in some ways, forgot its roots. Not that Seattle was the end of the earth before Amazon came along; but Seattle wasn't the Seattle today when Amazon got started. They could have transformed a place like Detroit, Cleveland, Raleigh, North Carolina. These places would have grown along with Amazon. Instead, they came to, let's call it Washington, D.C., which was basically the only part of the country that didn't suffer that much during the financial crisis. Who knows why? And New York. It'll be a great place for the for the headquarters to be, but in some ways, I think they really, really missed an opportunity to be a little more civic-minded.
Hill: Let's get to some earnings. SurveyMonkey up 14% this morning after their first quarterly report as a public company. SurveyMonkey's revenue up nearly 20%. This is a stock that, they go public, and the stock basically went down from there. It's up today. At least in terms of their first report out of the gate, they look like they're off to a decent start.
Mann: Yeah. They only lost $0.01. I have a little bit of a bias against companies that seem like they ought to be just an app or just a utility. There is kind of an open question about SurveyMonkey, whether it actually needs to be its own company, or whether it would be better served being part of a larger company. A company that they considered to be a rival, Qualtrics, recently got purchased for $8 billion, which is pretty good. Yeah, it was good report. But over the long-term, it seems like the kind of company that could easily be disintermediated.
Hill: That was the interesting thing with the Qualtrics story, being bought by SAP. As you said, $8 billion. I think some people looked at SurveyMonkey and thought, "Maybe this thing is not worth $8 billion, but maybe it has more life than we think."
Mann: It's a very open question. You think about a couple years ago, ten years ago, when eBay bought PayPal. PayPal, coming out of the gate, was probably in the same boat. But PayPal was transformed by virtue of being part of eBay. It was much more valuable as a component of eBay. Then, when they spun it back out, it was at a time in which it became a utility for a lot of people and a lot of different applications. But, yes, I think SurveyMonkey has real potential as part of a larger company. But it was a good report. They do use one of those things that you hate. They call themselves "freemium." This is something I learned about Chris Hill today, his distaste for made-up compound words.
Hill: Yeah, I'm just not a fan.
Mann: I don't blame you. And "freemium" is at the top of the list of fingernails on a chalkboard.
Hill: Shout out to one of our listeners, Neil in Rockfield. When we talked about SurveyMonkey the other day in the wake of the Qualtrics deal, I questioned, why a monkey? If you're going to name it after an animal, why not go dolphin?
Mann: Or an owl.
Hill: And Neil reminded me that I was overlooking Reginald the monkey, who it a primate who picks NFL games on Tony Kornheiser's podcast.
Mann: This is true. There is actually evidence of math skill among monkeys. Or, at least one. And it's not called SurveyMonkeys. It's just the one.
Hill: I think SurveyMonkey needs to get in touch with Kornheiser's show, and that should be your mascot. It shouldn't just be a monkey, it should be Reginald the monkey.
Mann: That's right.
Hill: Our email address is [email protected]. Write to us, would you? We're lonely.
Mann: Please do!
Hill: Alex Larson writes, "With Nvidia reporting later this week, I'm curious as to Foolish input on the current chip marketplace. Stocks like Nvidia and Western Digital and Micron Technology have all gotten beaten down recently with supply and other market pressures. What are some steps I should take to decide whether this could be a buying opportunity or if I need to stay away from dangerous market dynamics?" Great question. He's asking it about chip companies. You can ask us about any company. It's always a great question, to look at a group and say "Wait, is this oversold and a buying opportunity? Or is there stuff going on here that's like, no, look away for now?"
Mann: If you recall, one of the big reasons that Nvidia has gone up a lot over the last 18 months is because its GPU processors were a big part of mining for Bitcoin and other cryptocurrencies. I am now wondering if mining for cryptocurrencies is going to be assigned to the dustbin in the same way that surfing the web was, and other terms that used to sound pretty cool and hip. So, it's definitely the case that this company and some of its competitors have been brought along quite strongly with the interest in cryptocurrencies, which has waned somewhat. The price of cryptocurrencies has stopped moving 15% per day.
I went and did a little bit of a search on Nvidia. At the present, they are advertising 1,100 jobs. They are hiring in a huge, huge way. If you were to ask Nvidia whether its best times are behind it, either they're crazy, or they see huge growth initiatives in front of them.
Anyway, don't worry about it so much. But you do need to understand with these companies that they did get bid up pretty well because of their association with what I think most certainly was a bubble in the cryptocurrency market.
Hill: Alex is right. You look in the recent past, certainly Nvidia has taken a tumble. You broaden it out to just 2018, it's basically flat for the year. It's not like tumble you brought it out to just 2018 it's basically flat for the year. By the same token, it's not like it's also some screaming buy, necessarily.
Mann: Probably not. The technical analysts would call it a consolidation phase or whatever. But that actually really does happen with companies that are good companies, that have good futures, who are on the back side of something that probably was a bit of a bubble. Certainly, people were awfully enthusiastic about everything related to cryptocurrencies, and Nvidia was a big part of that.
Hill: Alex concludes his email with a second question. "What is the best place to find The Motley Fool's formal recommendations?" I'm glad you asked. We don't talk about this that often. I should probably talk about it a little bit more than I usually do. This is a good opportunity to remind people, yeah, we do actually have investing services here at The Motley Fool. You can go to our podcast center, fool.com/podcasts. At the top of the page, there's a gold box that says, "latest stock picks." Click on that, and you can find some information on how to get started with Stock Advisor or Rule Breakers, which are two of our best-established flagship services. And you can kick the tires on them. Something we've gotten better at as a business over the past decade is getting people into the right services for them. A lot of times, with new members, there's a lot of enthusiasm. And in some cases, members think they're looking for X, but really, what they're looking for is Y. That's why, with Stock Advisors and Rule Breakers, you get a chance to kick the tires for a few weeks and decide if it's right for you.
It's National Pickle Day. Congratulations to the pickles.
Mann: Dan is excited about this.
Hill: Producer Dan Boyd, very excited. I had to look it up. I hear "pickles," and if you're asking me to name a brand, maybe this is my age, Vlasic. I immediately go to Vlasic Pickles, which was owned by Pinnacle Foods. Pinnacle was recently bought by Conagra. Shares of Conagra down about 6% this morning. Clearly, National Pickle Day is not moving the needle for Conagra.
Mann: We need to get busy.
Hill: I was saying right before we started taping, you're a little bit more excited about this than I am. I'm not averse to pickles, but I don't think I'm the fan that you are, and I'm certainly not the fan that Dan is.
Mann: I like the sweet pickles, I like the savory pickles. I learned from the Pickle Foundation --
Hill: [laughs] Never let it be said that research is not done for this podcast!
Mann: -- Americans eat 5,200,000 pounds of pickles each year.
Hill: I don't know what I would have guessed, but that seems like a large number to me. That's probably higher than I would have guessed.
Mann: That's a little less than a quarter pound of pickles per year per person. I think a lot of people are not pulling their weight, because I think it ought to be a lot higher than that.
Hill: I'm sure the Pickle Foundation agrees with you. Dan, do you want to jump in here?
Dan Boyd: I definitely eat more than a quarter pound of pickles a year. I love pickles, man! Those things are great!
Hill: Dan and I were down in Atlanta recently. On the recommendation of our colleague, Taylor Harris, we went to a phenomenal place for lunch called Vortex.
Mann: Surprised you made it out.
Hill: It was it was a pretty phenomenal meal. One of the noteworthy things about it was, the burgers that we got came with a side of fried pickles. I think that was my first time having fried pickles. I'll tell you this, it's certainly not the last.
Boyd: Fried pickles are --
Mann: They're the truth.
Boyd: -- they're near the apex of fried foods. As far as foods you can fry, what would be the best, pickles. Oreos, too. If the listeners have never had fried Oreos before, I highly recommend it.
Hill: I was just going to say, there are a lot of things that people are frying now that are out of the range of, say, potatoes.
Mann: Fried pickles keeps you in the vegetable family, though.
Hill: That's true. You're saying there's a health factor?
Mann: [laughs] I'm saying, how could you not eat fried pickles?
Hill: There's a health benefit.
Boyd: They're fantastic. They're so good.
Hill: But, fried Oreos, I was going to ask. I've not had those.
Boyd: I didn't know that fried Oreos was, one, a thing; and two, really good. They're fantastic.
Mann: Also vegan.
Boyd: Depends on what batter you use.
Mann: Fair.
Hill: Is there a place around here where fried pickles are table stakes for anything you order? I'm sure there are. Right now, one of the dozens of listeners in the D.C. area is yelling at his or her phone, "Yes! It's this place!"
Mann: Tupelo Honey in Arlington. Very, very good.
Hill: Road trip.
Mann: Right now.
Boyd: Or Metro trip.
Hill: Given how the subway system is running these days, we might want a road trip. Bill Mann, thank you for being here!
Mann: Thanks, Chris!
Hill: As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. That's going to do it for this edition of Market Foolery. The show is mixed by Dan Boyd. I'm Chris Hill. Thanks for listening! We'll see you tomorrow.
