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Barron's Believes New-Tech Disruptors Are Done

Matthew Chapter 18 verse 15 states, "If your brother or sister sins, go and point out their fault, just between the two of you. If they listen to you, you have won them over."


There are many verses taken out of context in the Bible, and this leads to a lot the stances against Christianity. The verse above is meant to make a certain point - I need to respect anyone that I am about to attempt to help by speaking directly to them. There are other components from the overall context here such as, make sure I myself am not sinning before I think to correct someone else, and always attempt to bring up a topic like this with kindness. And also to seek counsel from others as part of the process, especially church leaders and pastors. A Christian is not supposed to be hammering someone as the "holier than though" stigma suggests. It is impossible for me to "win" someone over without taking proper steps to truly show that them that I care about them.


For investing, when market times are good, people complain, but when market times are bad, the complaints turn into vindictive attacks. It's very easy to watch a company during 2020 pandemic-driven peaks fall 60%, 75%, even 95% and simply claim that the company is a goner, or "deserves" it. Or far worse, that investors deserve to lose their money because they should have known. In many ways, recessions and corrections bring out the worst in public discourse. This is why I always assess the fundamentals and growth trajectories as things change.


Topic


I've been writing and investing in companies that are against two things - the current centralized system and detachment from the aging global population. Centralized control and authority is never good and in the U.S., it's at an all-time peak including collusion between Big Government, Big Tech, and Big Corporations. With respect to aging, Elon Musk said it best when asked if we should live longer and/or forever, His response, no, the longer someone lives, the more disconnected they become from younger generations, which is bad for innovation. Today's older generations are trying to hold onto the baton versus passing it along.


This weekend, Barron's came out with a review of new school versus old school companies, with the statement that new school doesn't have a chance. It's no surprise as Barron's is a centralist-owned sounding board:


It's new school versus old school, and the new school doesn't stand a chance, Ben Levisohn writes in this week's edition of Barron's. The damage to the disrupters-or emerging tech, or growth-at-any-price-stocks is well known by now. Carvana (CVNA), for instance, was supposed to disrupt how people buy cars, but its stock has dropped 79% over the past 12 months, while its losses continue to grow. Robinhood Markets (HOOD) was supposed to change the way people invest-and maybe it did-but its stock has dropped 73% since closing at $38 after its first day of trading on July 29. Teladoc Health (TDOC), which has set out to replace a visit to the doctor with a video screen, has dropped 75% over the past 12 months. Part of the problem is that many companies that were dubbed disrupters were simply beneficiaries of the COVID-19 lockdowns, the author contends.

Key Takeaways


I'm not concerned regarding statements like these as they are very disconnected from reality and tend to gloss at a point in time, but time doesn't stand still. It's interesting regarding the three companies highlighted as both CVNA and TDOC are clear leaders in the industries that they are pursuing.


Ironically, the statement around CVNA is highly misguided as they forgot to add the fact that CVNA has actually disrupted how people buy cars, and over the mid-term, is poised to leap-frog both AutoNation, Inc. (AN) and Carmax, Inc. (KMX). As an example, CVNA has generated $14 billion in Revenue off of 632,000 units through Q1 2022, compared against AN that has generated $9.5 billion off of 312,000 units based on a used vehicles comparison. KMX remains the leader with $32 billion in Revenue off of 1.6 million units, but CVNA's market share gains cannot be denied.

The other foolish part of this claim is that companies like CVNA and Vroom, Inc. (VRM) HAVE been struggling through all of 2021 and into 2022, because of the pandemic with respect to labor issues and logistics challenges as they scale. AN and KMX ironically were the greatest benefactors of the pandemic as they were able to absorb the substantial increase in used vehicle car ownership, that extremely inflated their Revenue results - 27% for AN and 65% for KMX in 2021/2022 Revenues. Despite CVNA's greater challenges and struggles, the company grew Revenue 130% - once these challenges abate, growth will reaccelerate further and market share gains will continue.


For TDOC I've written on them recently and it's pretty clear that the company is the standout leader for telehealth.

Even with the recent lowered guidance, the company is still poised to see robust growth approaching $5 billion in Revenue by 2026. What's the alternative, Amwell Corporation (AMWL)? This is a company with 9 times lower Revenue projected to grow at an even lower rate than TDOC. AMWL's connection through investment from Alphabet, Inc. (GOOG) got attention during the IPO, with the SP soaring north of $40 - the SP is down 97% from this level.


This is the core issue I have with content like this that is mainstream. It focuses on a biased, one-sided stance on a clear leader, when in fact the article would be better served acknowledging the success of companies like CVNA and TDOC, despite market volatility, while focusing on peers like VRM And AMWL as the plays less likely to succeed. Of course Barron's isn't going to call out a company GOOG has invested in.


I don't disagree with the call on HOOD, but it is funny how it is phrased that they were supposed to do X and maybe it did.......but.


Why it Matters


There are far too many holes in the approach to the topic by Barron's, and investors need to make sure that they steer clear from most, if not all mainstream information. The core claim of who was simply a benefactor of the pandemic is highly misguided at the end. Big Tech was clearly the greatest benefactor from the pandemic. When you have a company like Apple, Inc. (AAPL) headed for below 5% Revenue growth and then a spike of 33% growth occurs, it's pretty clear, as this was not generated by AAPL organically, but from centralist government impacts to the economy. AAPL had not seen Revenue growth anywhere close to this since 2015. Investors could go down the list with FAANG-M to see similar results.


What tends to happen with mainstream media today, is that it claims X is bad or part of the problem, when their support of Y is clearly the more egregious offender of their claims. This is a rinse-repeat approach used excessively in politics and seeing it re-hashed within investing subject-matter is not surprising, as well, everything is now political. Investors need to be prepared to absorb a lot of hyperbole, extreme claims, and as Barron's has provided, poor information without context.



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