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hello everybody and welcome to investing with IBD sponsored by Market Smith
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today is February 19 2020 I'm your host Irusha Peiris and with me today is Andy
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Swan he is the founder of LikeFolio thanks for being here Andy yeah thanks
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for having me on on today's podcast we are going to talk
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about the current markets how social data can help you in your stock analysis
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and then we will end the episode with three current stocks so the current
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market the market continues to be in an uptrend we have two distribution days on
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the Nasdaq five on the S&P 500 but the market continues to climb that wall of
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War II and more importantly leading stocks are acting well in hitting new
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highs Andy what are your thoughts on the market yeah I think you nailed it it's
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just very strong and continues to just defy expectations I think you know it's
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almost like the more negativity is in the in the headlines of the world the
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higher the market goes yeah I think there's pretty good reason for that I
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think that the economy is strong there's a lot of wealth being created and you
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know there's a lot of great companies doing some extremely innovative things
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so I think that drives a lot of this and there's excitement around around all
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that plus money's pretty cheap that's true and and also you know the US
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markets are now like the safe haven right this seems like the money's coming
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from everywhere else and let's Park in the US markets because of that
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innovation and also where we're not having as many crises as a lot of other
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parts of the world that's right yes exactly and and so you definitely want
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to make sure you're keeping your watchlist fresh keep an eye on those
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leaders because eventually there's going to be a time for a pullback and so
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they're gonna set up and give everyone an opportunity to get buy more shares or
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start initial positions so Andy let's get into how you got into investing
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you've been doing this for a while now and so why don't you walk us down the
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path that led you to starting LikeFolio yeah so we actually it's
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you know my brother and I have been partners in this since the very
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beginning we actually opened our first brokerage account together we were
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college roommates oh wow and this was you know this was in
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college it was 1998 1999 markets were popping like even at the
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gym people were watching CNBC rather than anything else it was just the
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dot-com boom and everything was moving and it was a great way to get involved
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in it was really like very exciting and it made sense to me the markets did I
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understood not necessarily you know valuations and things like that but I
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understood supply and demand and how companies can participate in in growing
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the economy and that sort of thing and so there was this new era that made
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sense to me I was online a lot I understood the dot-com boom and in the
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in the ways that I could yeah and so I got very interested in the stock market
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started studying it started trading our money and you know really just kind of
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learned by going and that I think a lot of times people miss that aspect of it
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it's everything's kind of academic until you have real money on the line I think
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for a lot of people and it doesn't have to be a lot we started with a couple
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grand in a brokerage account and that was you know very real to us and very
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fun and you know it's just super interesting from the very beginning in
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1998-1999 it sounds like a long time ago now but it doesn't feel like it no not
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at all because that that was the time where I got exposed to the markets too
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and it was remarkable how everyone was talking about the stock market at that
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time let's you touched on an interesting concept here about you know putting real
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money on the line and the emotions that people feel a lot of people it you know
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especially more analytical people they want to do all the analysis first before
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making that move and it's that paralysis by analysis but going to a little bit
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more about you know just put some money on the line and learn to feel those
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emotions that come out when you start doing well in the markets and then when
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you start doing really poorly yeah I think I just think that it's really easy
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to pretend that you're doing something and you know it's kind of like I you
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know I like to make sports analogies all the time because I play basketball and
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you know it's like you can't really read a book on how to shoot a free-throw and
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eventually you got a step to the line with a crowd around you and with other
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players on the line and the scores going to matter and that changes everything
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and all that stuff that you read goes out the window and so I think it is
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important because probably the most important part of investing I think is
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you know understanding your own emotions and how they can throw you off track and
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disrupt a strategy that you might have and so until you have those emotions
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engaged you really don't know how to control them and unfortunately I haven't
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found anything that really beats a couple of bad losers in terms of
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teaching lessons in a really quick way and that's true though the market has a
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great way of humbling all of us yeah so after you and your brother started your
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brokerage account you started putting real money on the line what were the
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next steps that got you more involved and really started you know enabling you
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to become an entrepreneur yeah well we had we had really good success and you
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know a lot of people a lot of people did at that time because it was the dot-com
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boom and everything was going up but you know we had some unique advantages we
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figured out we figured out like simple things like real time quotes and level 2
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quotes and things like that that were kind of unique at the time so we were
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always looking for that little edge and we were able to find someone exploit
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them and eventually you know through the chat rooms and other message boards of
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the time had actually built up a little bit of a name for ourselves through what
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we were posting both in terms of picks but more importantly educationally
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online and so about a little ways through law school about six weeks into
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law school in fact I decided this this is not for me I don't necessarily want
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to work with and surround myself with lawyers for the rest of my life
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I really have something good going in the stock market and people are coming
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to me constantly not for my picks but more for you know
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how to get started in that educational component
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so that's when land and my brother and I got together and decided let's start
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something where people can actually pay us to help them get started investing we
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did that we we eventually turned that into I think it was the world's first
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live-streaming you know content and educational channel for that was that
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was going across the internet throughout the market day and you know people
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subscribe to that and we built that into a nice little business that eventually
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we sold and and that got us kind of kicked off on the entrepreneurial path
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that's very very cool and so now your latest venture and and is like folios
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your brother involved in that one - yeah we're partners on that as well this is
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our third fin tech company together and yeah we're having a lot of fun with this
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the the reason that we started LikeFolio kind of goes back to those roots
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and its pivoted since then but back at the beginning the idea behind LikeFolio
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and the name was really we wanted to help people create portfolios based on
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the companies and products that they actually liked in real life and so we
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use social media to figure out what they and their friends were talking about
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online and actually created a portfolio based on those products called a like
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folio the the idea was to get people interested in investing it didn't take
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long though for us to realize that there was a lot of value in the data itself
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and in figuring out what brands and products people were talking about we
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were able to see some really interesting correlations between that data that we
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saw in social media and upcoming future earnings reports and savings store sales
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numbers yeah and I I saw you speak in the traders Expo in Las Vegas back in
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November and it was a really fascinating presentation because for us a lot of
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times we're looking for stocks that aren't strong up trends you're looking
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for the purchase intent in strong up trends but the stocks might be getting
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hit and might be you know falling off a lot of people's radar so that's what I
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liked about it it's like okay this is another way to get some of those stocks
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that might have fallen off my radar back on my
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yeah a great example of that would be you know last summer the our great call
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on Crocs the maker of the ugly shoes and what we start you know that stock had
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fallen off everybody's radar it was down around fifteen or sixteen bucks and
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really kind of dead money but what we saw was a massive uptick and a really
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pretty fast and accelerating uptick in the number of people talking about
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buying Crocs and liking Crocs shoes and the new models that they had and there
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was some influencer action behind that I think Ariana Grande and Justin Bieber
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were caught in public wearing Crocs and not necessarily paid to do so and that
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just started this this trend and Crocs were on a comeback and we were able to
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see that through the mining of social media data you know well before the
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stock made the move from I think 16 to you know forty dollars yeah and and in
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the end you know the large concept that we're all looking for here is you know
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that supply and demand whether you see it in the stock market or in the
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products that can eventually lead to those Rises and in stocks yeah that's it
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I mean I think what everybody's looking for is an edge right we don't claim to
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have the golden goose that produces profits every single time no one should
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ever claim that you know but what we can provide and what we do you know work
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really hard to discover are those small little edges that can add up to a
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distinct advantage for the investor over the rest of the market and once you get
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that you start exploiting it over and over and you know those those what were
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small gains can start to turn pretty large absolutely so the markets continue
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to remain in a strong uptrend and we're almost done with earnings season let's
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take a quick break but when we return we'll go more into this and we'll talk
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more about the social data and how it can help you with your investing stay
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tuned I am here with Scott st. Clair Scott's
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one of our senior product coaches at MarketSmith now Scott there are a ton
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of publicly traded stocks just on the US I think it's over five thousand stocks
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who has the time to go through all these stocks and find the very best one yeah
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most people don't right so what you need is a tool like MarketSmith we have
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decades of research and what makes a great winning stock so we've done all
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the research for you so we're gonna try to highlight those specific stocks with
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those great data points so if you're looking for that next great potential
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big winner orange stock ideas button you just click on it and you've got some of
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the main reports that we use including the growth 250 yeah and the grow 350 is
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the first list that I go through on the weekends yeah it's the most popular one
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but there are others there's the breaking out today stocks near a pivot
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and then the blue dot list right which is very popular it's going to show you
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the stocks with the best relative strength so we've done a lot of the work
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for you what you have to do is review these lists you're going to come up with
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some of the best ideas in that current market environment perfect MarkSmith
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saves you time and makes investment research that much easier for more
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information go to investors comm slash podcast 2020
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and II Swan is our guest on investing with IBD sponsored by MarketSmith okay
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Andy let's go over how we can use social data to help us with our stock analysis
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and I think maybe the best way to start off is with how Tesla came on your radar
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because that was a pretty cool story that I heard back in Vegas when you gave
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your presentation yeah back in November I was a little
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nervous to give that because Tesla was going through a little bit of a rough
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patch it started to move higher at that point but you know was was widely hated
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I want to just I think it's a great opportunity to make clear that what
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we're doing it LikeFolio has nothing to do with tracking investor chatter about
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the stock itself we're not concerned with that at all in fact a lot of times
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we found that that can be a contrarian indicator and rather what we're doing is
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focused on what consumers are saying about the brands and products that the
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company makes and all of that information is you know it's publicly
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available on Twitter we have a great feed directly from Twitter we're
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partners of theirs and so this is you can kind of think of it as a real-time
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consumer poll that runs 24/7 you know and is looking at the the opinions and
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experiences of people that don't necessarily know that they're being
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watched so you can trust the data a little bit and so with Tesla what we saw
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was a really nice spike and very sustained in purchase intent mentions
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and so that's what we call it when people are talking about actually making
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a purchase of the product they're leasing a Tesla they're buying one
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they've pre-ordered that sort of thing and so we saw a really nice sustained
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acceleration and purchase intent mentions especially around the Tesla
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Model 3 which was what Elon Musk had essentially bet the company on right and
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we so at that point we're able to see that consumer demand for this product is
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extremely high and is growing rapidly at almost a you know kind of an insane pace
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what we don't know is whether or not Elon Musk and the company is going to be
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able to deliver what their production issues might be their debt structure all
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those types of things still have to come into play but
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we could say with certainty on that stage was that consumer demand for Tesla
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vehicles and especially the model three was through the roof and for me that's a
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great starting point when you're looking at a company especially one with the
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short interest that Tesla has yes exactly
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and and as we know I mean probably tussles around 350 at that point when
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you were talking about it and who could have imagined that it would have gone on
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the amazing run that's gone but when you are heavily as shorted as Tesla was you
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know that the shorts have to learn a lesson too about not fighting the trend
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yeah I think you know it's it's kind of one of those you know perfect storms in
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a lot of ways because you know you had a huge short interest on the stock that
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had to come off at some point and it just seemed like with the data that we
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had on on consumer demand for the products that at some point the dam was
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likely to break to the upside now did I see it going to $900 no but but I did
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but we did think that it had room to run in a very meaningful way over the course
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of a you know two or three years it just happened to happen much faster than that
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and a lot of that was due to the you know the demand that had to come into
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the stock once it started moving higher and those shorts started having to cover
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right and and and that's where that's that little bit of an edge that that you
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give and you get a few of these edges that's that can make all the difference
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in the world because you take that edge and then you apply it to your own stock
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strategy and your own setups and when you know whatever stock is actually now
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buyable for according your strategy now you can put that plant in a place so
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that's what I like about it is that okay here's a little bit more insight that I
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did not have before yeah I think that I think that's the whole key and that's
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why you know most of our clients and most of our revenue you know ninety
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percent plus comes from institutions and institutional investors who are looking
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to put this into their formulas and into their processes and the biggest
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component here that we can offer is that we can say
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I don't know about the debt structure I don't know about their ability to
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produce but what I do know is that the demand has never been higher and is
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growing in an exponential pace and that a lot of times is enough because if you
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remember back in the summer of 2019 and even into the fall when I was speaking
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on that stage there was a lot of chatter online that maybe people weren't going
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to buy these cars that they weren't popular enough that they were sitting on
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you know in the parking lots of the production facilities going unsold and
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it was you know kind of that ability to tap into social media data that it led
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us to say that's absolutely not true we know that with a high degree of