Channel Surfing, Binge Watching, and Cutting the Cord

 

Over the past thirty years that  my wife and I have known each other, we have always enjoyed watching our favorite television programs together. Fortunately for us, we have about the same tastes in shows. With all of the steaming options available today--and so-called "Prestige TV--it is an endeavor to find what is going to be on our screen next. So, my job is to do some research to find the next series or limited series that will appeal to both of us. I have to stay on my toes with this task, because if I fail to deliver, my wife will tune in to her default option, the Hallmark Channel. I have nothing against these programs, but it seems to me that all of their movies have essentially the same plot, with the main variable being who Lacey Chabert, Hallmark's ridiculously cute perennial heroine, will fall in love with this time. I guess my chromosomes are showing, as Hallmark fare seems to have the greatest appeal for the female audience.

Thinking back on how our viewing habits have changed, I realize that the only scripted show we continue to watch on traditional network television is Blue Bloods, and that show is in its final season. My wife has been talking about how we should "cut the cord" with our cable tv service, and I know a lot of other people who are thinking the same thing (if they have not severed it already). The real game-changer here, poised to push us over the edge, is YouTube TV, which seems to offer just about everything that cable delivers. This cord-cutting trend has had me questioning our small position in Comcast (CMCSA, $43). I don't like to invest in companies that are losing customers. However, Comcast also owns NBCUniversal, so they have quite a collection of assets under their roof. A major investment thesis of mine involves content, and the demand for programming to put on all of these channels and services. I have held this view for many years, and I'll have to admit that it hasn't played out as I had expected. To further make the point, consider Disney (DIS, $123). They own everything from Snow White to Frozen, and that means all of the merchandise based on those films (I have a granddaughter who loves to sing Let it Go, almost to the point sometimes that I could use a Valium). Comcast and Disney are each up just 7% over the past five years, underperforming the S&P 500, but I continue to think that the market is not properly valuing those assets. Consider that Apple (AAPL, $171)  has a market capitalization of $2.6 trillion, while Disney's market capitalization is $225 billion. Is Apple really worth ten times more than Disney? I don't think Apple is worth too much--I think Disney is worth too little.

I tried recently explaining to a young person how television watching has changed in my lifetime. I started out by noting that what used to come over the airwaves (television) now comes through a wire, and what used to come through a wire (telephone service) now comes over the airwaves. I guess I should have started my story with something more attention-grabbing for such a young mind. Maybe my contemporaries will appreciate the nostalgia of a rooftop television antenna and the four channels we had when I was a lad. My favorite business story, however, is the transformation of Netflix. Do you remember their mail-order business? Those red envelopes? Now Netflix is a media behemoth with plenty of its own content. I remember once on one of my many trips to rent movies at Blockbuster (especially the one in Destin, just across the highway from our condominium) I wondered what would happen if Blockbuster could deliver their movies over cable, saving us all our trips to their locations. I wonder if Blockbuster even considered buying Netflix. Actually, Netflix tried selling itself to Blockbuster at one time, but the latter company wanted nothing to do with it. This is what we can chalk up to "a failure of imagination."

If you are looking for the next bit of quality programming to watch, I have found that Internet Movie Database (IMDb) is my indispensable resource. I have the app, IMDb, on my iPhone, and I consult it constantly. This will tell you everything you might want to know about any series, movie, performer, etc. It has certainly helped me pull my wife out of the Hallmark quicksand.

I imagine that someday soon I'll be hauling our cable boxes off to the Comcast store to complete the cord-cutting--and get the credit I am due for surrendering the equipment. If you might be following in my footsteps, here's a tip: I always go to the Comcast location in Germantown. It is worth the extra drive, because the location closest to my house always seems to be filled with people who are trying to pay their bills to avoid a service shut-off. Apparently, the good people of Germantown pay their bills the old-fashioned way--on time.

For now, my wife and I seem to be set in our new ways and content with all of our streaming options. But, if you notice that we are eating 5:30 dinner at Piccadilly and rushing home to catch Wheel of Fortune every night, it will probably be time to call the Intake Team at Trezevant Manor. And one more thing: if you have cut the cord or are thinking about doing so, please send me an email about your thoughts and experiences at my email address below.

Life is short. Get busy.

Jim

Disclosure/Disclaimer: My family members and/or I own shares of CMCSA, DIS, and AAPL. Individual stocks are mentioned here for the sole purpose of illustrating investment concepts, and nothing stated here should be construed as the advice to buy or sell any security.

Copyright 2024 James Brinkley Taylor, Jr.

I welcome your thoughts, questions and feedback, so please email me here:

jbrinkleytaylor@gmail.com

Ripped From The Headlines

Is it possible to achieve investment success in stocks using just information gleaned from general news sources and our own observations--and without poring over "official" investment analyst reports? I have known many investors who have done just that. They pay attention to what is going on in the world around them, and they apply knowledge from their own field of expertise. 

First off, what do we mean by "success"? Different people have different definitions of success because different people have different goals, and success is usually measured by the extent to which we reach a stated goal. In the original Rocky movie (1976), Rocky Balboa does not win the climactic match with Apollo Creed, but he does go all 15 rounds. That is success enough for Rocky (and quite an eye-opener for Apollo). For investors, the success of a stock portfolio typically means outperforming some benchmark, such as the S&P 500, consistently over time. If over a five year period the S&P  was up, on average, 10% a year but your stock portfolio was up 7% annually over the same time frame, that is not really success (you would have fared better buying the index fund). It would be success if your goal was to not lose money, but that is not really what we are considering here. Just to be clear, I am referring to that portion of your assets that you choose to invest in stocks, your stock portfolio, and not your other assets like real estate or bonds.

Now let's fire up those powers of observation. It does not take a rocket scientist to know that there are a lot of overweight people in America. Being overweight can lead to diabetes, which can cause kidney failure. Dialysis, anyone? This line of thinking might put dialysis center operator Davita (DVA, $138) on your radar screen. It would have been a nice addition to your portfolio, as DVA has had a five-year annualized return of 20.44% versus 12.73% for the S&P. In another case, suppose that at the beginning of this century you had noticed the popularity of energy drinks--you see your friends drinking them and you observe their shelf space in grocery stores. If you had invested in Monster Beverage (MNST) 20 years ago, you would have found the best-performing stock in the market. Shares have gained more than 100,000% over that time period, well ahead of the S&P 500. I can't resist calling these "monster" returns. Is investing really as simple as paying attention? No, of course not.

Good information is the lifeblood of investing, with the emphasis here on good. There is so much information that comes across my desk and through my email inbox, and most of it is useless for making stock choices. I actually divide information into two categories: actionable and non-actionable. Most of what I see (just glance at, really) is about as actionable as a coupon for a Brazilian Butt Wax (this is a real show on cable). Most of the actionable information is what I actually pay to receive. My favorite among the investment advisory services is The Motley Fool, which has supplied me with quite a few very profitable stock ideas (Netflix, Amazon, Facebook, and NVIDIA to name a few). If you are going to follow one of these services, be sure to do a little digging into their track record. Your power of observation is a great place to start, but at some point it is a good idea to read some trusted and reliable investment research--and that is not necessarily research from the brokerage firms. This will also help remind you that the product is not the same thing as the company, and the company is not the same thing as the stock.

Now, when it comes to observation, when was the last time you saw a television commercial for a home generator? I can't recall seeing any until a few years ago when I started seeing commercials for Generac (GNRC, $114 ). Every house I know of at Horseshoe Lake that has a generator has a Generac. Most of these houses are new and were built by the same contractor, who recommends Generac. Most homeowners take his advice, because most of them are not inclined to go shopping for one. What is reliable about the power at Horseshoe is that it reliably goes out--like every time there is a good gust of wind. I like to keep meat in our freezer, so I don't want to worry about losing power. I suspect that what is also going on here is that generators are going mainstream. I think the home generator is something akin to what microwave ovens once were--something that very few people had. Once people realized what a convenience a microwave could be, more people started buying them, and today I would say that it is rare to find a kitchen without one. So, if I'm correct, the generator will soon be just another standard home appliance. When you start seeing commercials for Generac's competitors, you'll know that the day has arrived. Keep those powers of observation sharp!

Life is short. Get busy. And Pay Attention!

Jim

Disclosure/Disclaimer: My family members and/or I own shares of AMZN and NVDA. Individual stocks are mentioned here for the sole purpose of illustrating investment concepts, and nothing stated here should be construed as the advice to buy or sell any security.

Copyright 2024 James Brinkley Taylor, Jr.

Email me with any questions, comments, or feedback:

jbrinkleytaylor@gmail.com

The Magicians and the Luddites

 

"Any sufficiently advanced technology is indistinguishable from magic."

---Science fiction writer Arthur C. Clarke

I remember using a manual typewriter to type my papers when I was in high school and college. I could hit one of the keys and watch as the metal arm rose up to strike the ink ribbon to put a letter on the page. I wouldn't call it magic, but the typewriter was a marvel when it was first introduced in the latter part of the 19th century. People who employed their penmanship for office work were out of a job, of course, the same fate suffered by the buggy whip makers after the advent of the automobile. As technology advanced through the twentieth century and into the twenty-first, each successive innovation probably more and more seemed to resemble magic. Artificial Intelligence (AI) is now the latest trick out of the box--and Wall Street loves new tricks.

The chief magician on Wall Street right now, the Harry Houdini, if you will, of the technology sector, is NVIDIA (NVDA, $870), the company that makes the complex chips that are required to make AI work. If you had invested $10,000 in NVDA ten years ago, that investment would be worth about $2 million today. It is human nature to hold a fascination for shiny, new objects, and as investors, we don't want to bet against human nature. Teenage boys like to look at pictures of naked women, and men don't go to Hooters for the food. For better or worse, human nature is not likely to change. Visionaries over the generations have tapped into human nature to launch wildly successful enterprises. I am thinking not so much of Hugh Hefner, but instead of Walt Disney. Disney understood that people of all ages loved stories, and that children would be fascinated by animated cartoon characters. A simple rule is to give the people what they want, not what you think they should have. Better yet, convince them that what you have is what they truly want.  That is what made Disney (DIS, $112) a rewarding investment for generations. As long as technology holds the promise of making life easier or more enjoyable, or making work easier, consumers and businesses will likely be willing buyers. I am writing this at my computer keyboard, and I have no idea how my keystrokes make it onto my blog. But I don't need to understand that, because all I really care about is that it does what I need it to do. And it's a lot better than that old, manual typewriter.

The Luddites were a group of textile workers in early 19th century England who saw the new textile machinery as a threat to their livelihoods. They felt so strongly about this threat that they took sledgehammers to the new machines. People who raise concerns about technology today are often referred to as modern day Luddites. They probably won't be smashing up any machines, though, because the brains of AI are working away in data centers spread across the country. For years, some people have voiced concerns that jobs will be lost as a result of new technologies. The analysts and economists typically respond by saying that the same dynamic economy that produces AI will also produce new jobs to go along with it. That is true in a macro sense, but you and I live our individual lives very much in the micro.  If  AI can write your company's marketing plan,  just how many warm bodies do you need working in the marketing department?  "Labor saving" technology sounds appealing, until the labor it saves is yours. And then what do you do if your skills are no longer in demand because your job is now being handled through the magic of AI? You can go get a degree in computer science from M.I.T., or you can start cleaning hotel rooms (until that job is done by a robot). Let's hope the choices are not really that extreme.

Another concern raised about AI seems to come from the conspiracy corners of the world. Namely, that the technology becomes so powerful that it has a mind of its own and takes over everything. Think about the AI computer HAL in the movie 2001: A Space Odyssey. If some AI system takes over and starts launching nuclear missiles to start World War III--well, nobody will be around to say, "I told you so." (And nobody will be around to listen.) I would like to think that if an AI system started running amok, then someone would just pull the plug and disconnect the wires.

Some more down to earth worries that we are likely to hear much more about in the not-too-distant future involve the technology's environmental impact. It takes enormous amounts of electricity to run these data centers--and huge amounts of water. Here are links to two articles on the topic:

https://www.nytimes.com/2024/02/29/business/artificial-intelligence-data-centers-green-power.html?unlocked_article_code=1.aE0.R-0U.Q9Ik-n9JCIhN&smid=url-share

https://www.theatlantic.com/technology/archive/2024/03/ai-water-climate-microsoft/677602/

Another question worth pondering here is, What happens when the rabbit doesn't come out of the hat? What happens when the technology fails? Just recently the AT&T cellular network went down, and I saw firsthand the panic that ensues when people can't use their cell phones. Waking up to this reminded me of the morning when I got up and was all ready for my day when I went outside and discovered that my car had a flat tire. So much for my best laid plans, at least for a few hours. We all take for granted that things are going to work--that when we flip the switch, the lights and the coffee maker will come on. But what if the power goes out and stays out for an extended period of time? Like weeks or months?That could be caused by a solar flare of great magnitude, or by a foreign adversary launching an Electro Magnetic  Pulse (EMP) attack. Either way, the power grid gets fried like Oscar Mayer bacon. Such a massive and extended loss of electricity would send society into chaos as people and stores eventually ran out of food. If you think crime is bad now, just imagine hordes of starving people barging through your front door and plundering your kitchen. I thought all of this was just more conspiracy stuff until I read a book called Lights Out by Ted Koppel, the former host of  the ABC news television program Nightline. It's a sobering look at how all of this could unfold.

Here is an article on the topic:

https://www.newyorker.com/magazine/2024/03/04/what-a-major-solar-storm-could-do-to-our-planet

I have always been an optimist, seeing the glass as half full (until I drink what's in it).  Rather than dwell on a low-probability yet terrible outcome, I choose to think about possible solutions. When choosing stocks, I like to look for problem solvers. The power grid is at the center of many concerns, whether due to the strains placed on it by electricity demands or the threat of a massive outage. The problem solver here might be Quanta Services (PWR, $240), which provides infrastructure solutions for the electric and gas utility, renewable energy, pipeline and other energy industries. The power grid needs to be upgraded and hardened, and PWR seems to be in the sweet spot for all of that work.

I don't usually make specific predictions, but I will venture two here. The first is that AI itself will actually be part of the solution, especially in the area of making more efficient use of power. Second, that we'll hear a lot more about nuclear energy as the solution to power demands. Meanwhile, I will be eagerly awaiting the next magic trick to come out of the box.

Life is short. Get busy.

Jim

Disclosure/Disclaimer: My family members and/or I own shares of NVDA, DIS, and PWR. Individual stocks are mentioned here for the sole purpose of illustrating investment concepts, and nothing stated here should be construed as the advice to buy or sell any security.

Copyright 2024 James Brinkley Taylor, Jr.

Email me with any feedback, questions, or comments:

jbrinkleytaylor@gmail.com