In this episode of the Trading Justice Podcast, Matt and Tim discuss the Tackle 25 release for 2020.
Each year, the coaches at Tackle Trading build their watch lists for the Tackle 25. This list serves as a candidate list to trade Covered Calls, Naked Puts and other strategies used by options traders throughout the year. Matt explains how we built the list, what stocks made the cut and those that did not. They also discuss the Dividend Fireworks, Poor Boys Covered Call, and Dirty Sexy Money watch lists. This is a very informative podcast, and you’ll get a lot of value out of it.
Before the feature, the team discusses the recent news regarding Iran and its impact on the markets.
Finally, Coach Mark has Noah, Matt and Tm rank the recent jokes from Ricky Gervais at the Golden Globes.
Episode 355 Transcription
Tim: without further ado though, we’re going to get into our feature presentation here today. But first day live read from coach Mark. It’s like to give a Psalm or Messi,
Mark: um, to our troops, those that have served, uh, previously. Those are current we serving. Uh, we at tackle trading have such a great respect, admiration. We have several students, um, that are currently in the military or have served. We’re allowed to have fun here on the podcast, talk about cash flow and financial things, and we’re able to go to parks on the weekend and we’re able to live, you know, when you think about it, like some of the highest quality lives that humankind has ever seen because brave men and women previously and currently do what they do to protect our freedoms, uh, to protect us from individuals that would love to do us harm. And so we would just like to send out, uh, in a time where the troops are certainly on, are in the forefront of many millions of Americans minds. Uh, our appreciation, our gratitude, our thoughts, our prayers, uh, for your safety or your family’s peace of mind. Uh, and just give you a sincere thank you for what you do for us. Uh, it is truly appreciated. Um, and I don’t think as a society we comment on it enough, but we certainly do today and just want to bring it in this life. Read, uh, my brothers, Noah, cause I know we’ve been, we’ve been talking about this separately just to share their thoughts on it.
Matt: I think sometimes we take for granted the freedoms we have and the freedoms we do have was kind of built on some of the blood, sweat and tears and people who paid the ultimate price for those freedoms. And I just think at times like this that we absolutely need to remember the people who fight for those freedoms and show our utmost respect and love and, and support in any, in any way we can in any way we can. Yeah, you’re here
Tim: present. You know, I was in the airplane, uh, yesterday coming back from Philadelphia where I had a trip out there teaching a three day basic training and there was a young man at the baggage claim right next to me and his army gear and uh, about my daughter’s age. I could tell he was heading either to basic training or from basic training. And I just asked him, how are you doing young man? And he said, very good sir. You know, very polite. Obviously those, those army kids always are and every branch of the military has a, you know, depth and all these people that really make America great quite frankly. I mean it really does and I’m thinking about them a lot, a, I care about them quite a bit. We all do. Everybody supports the troops. There’s no doubt about that. And uh, it is quite a sacrifice they, they go through to, to, to serve and to put it on the line because you know, no, when you’re going to get called and you, you don’t know when you’re going to get called into a conflict zone or whatever it might be.And hopefully all this deescalates but definitely that’s where my mind is here today as well. Matt, we’re all here because we’ve got a very special unveiling. We do this at the very first of every single year. A lot of work has been put into this, into the tackle 25 2020 edition. This is one of our flagship products is something that we’ve put a lot of effort into over the years. It’s grown, it’s developed. There’s a chorus behind it as well. And a, we’re going to go through that list here tonight. First of all, how you doing tonight, sir?
Matt: You know, Tim, I’m, I’m very excited about the 2020 edition of the tackle. 25 I’m gonna. I’m going to kind of open it up and show people how, how we kind of develop that list and, and the process, uh, we go through so that you guys can have an understanding and a trust behind that. Because you know, whenever, when, and I’ve said this many, many times, but whenever you trade somebody else’s systems, it’s, it’s important to understand the rules. It’s important to understand the techniques and the management and all that jazz. But I think you have to have trust and to have trust in it, I think you have to understand how it’s built. Right? And so before we get into the unveiling of the, of the new edition of the tackle, 25, I first want to recap the 2019 edition of the tackle. 25. And you know, I know it was a historical, uh, historical year. I mean a best year in the market since 2013 S and P up 29% and, and what really stands out to me about this year’s list, Tim and, and every year’s list is valuation matters to an investor. And in the last couple of years, I mean, you know, growth has taken over and it’s, it’s all the, it’s, it’s the, it’s, it’s the, the new sexy growth, right? And give me that yield, give me that yield, give me that yield. And you know, whenever you have a year, like this year and you’re up 29% of the S and P 500 value tend to, has a tendency to underperform in that environment. Tim and, and we, we put a lot of effort into making sure that these stocks on the tackle of 25 are fundamentally strong stocks with good valuations, EPS, growth trends, everything about it. And despite the fact that this is more a value based dividend cashflow type list. Tim, I just want to give you some numbers and guys, I’m like you to think about this because we’re all a team here. I want to just go through some numbers and then I’m going to go through some of the individual stocks from last year. First and foremost, the, uh, there were 25 stocks on the list last year, Tim, 24 show a show, uh, showed a profit. When you’re talking about that from a girl’s perspective and you hit 24 out of 25, Tim, I don’t care if the market’s up 30%. That is really, really good. Really good because a lot of that 29% top heavy with the apples and the Microsofts of the world, you know, those types of stocks. And you know, the only stock that underperformed was, was Pfizer. It had a really nasty earnings report if you’ll remember And it just got absolutely beat back down, showed some consistency in, in, in the, uh, the remaining part of the air. But Pfizer lost 10%. Everything else showed up positive about their, like I said, 24 out of 25 with an average 28 point 11% return on investment. And for a list like that, I mean, to come into this year, if you were to tell me that, you know, the tackle 25 would basically match the market minus 0.9%, um, on, on just growth, not even taking to account the dividend, not taking into account the, uh, the cashflow rate. Uh, with the covered call. I would’ve said you were crazy. This list is not designed to perform that well, and it just did. And a lot of that is just market, right? The market had an absolute ridiculous euphoric last couple of months in the market and that kind of brought up a lot of these stocks.
But despite that performance from last year 14 stocks are getting kicked off and, and, and not, not because of the lack the performance, you know, take a take, take, take a stock like new court for example. Right? New court didn’t have a great year last year. Really kind of went stagnant, only up about 8% versus the market at 29%. Um, but new cords have really good still stock. It’s a, it’s, it’s a, it’s a $60 billion still stuck with good valuations. So why to get removed. It just didn’t meet certain parameters. We didn’t get the infrastructure. We thought we did w uh, coming into a political year, you know, that’s a hypothetical scenario that may or may not pan out. I just didn’t want to deal with the volatility of it and we removed it. Take Intel, nobody would say the Intel’s a bad stock. Nobody wants a good company, good companies got good valuations. But it just, I mean it just, the ROI was just sucked out of it. Volatility was so low that, you know, it’s not a great covered call stock right now. And that was the challenging thing coming into this list is, you know, whereas last year’s list, all the cashflow rates for our skyrocketing because of volatility of December of 2018 and this year, all the, all the volatilities subsided and taken out of the stock market going. And so he was kind of hard and you know, until just kind of one of those, you know, so, so the stocks that are being removed very quickly and RG a utility company, new core steel company, PayPal, a credit card servicing company. Uh, Intel already talked about Delta airlines being removed from the list. Garmin, a great performer from the last nine months on the list after we removed a CVS corporation and Garmin’s going to be removed from the list. That’s more from a valuation perspective, E-Trade financials being removed from the list because we don’t know exactly what the brokers going to be doing in the future. And we want to see how that the commission free trading at the institutional level will pan out. So we just felt like that was a little bit of a risk. Also, ExxonMobil being removed from the list and Exxon, that does not mean Exxon’s a bad stock. These stocks can go sideways for a year and they’re great cashflow environments, wonderful cashflow environments, and it pays a nice dividend. It just didn’t, it wasn’t getting the ROI necessary on the covered call. And so we removed it and put it onto dividend fireworks. Alexion is still on dividend fireworks, constellation brands being removed from the list valuation, uh, concerns. And quite frankly, coming into 2018 guys, I, I mean 2019 I just felt like, you know, there was recessionary risk and by the way, I still feel like there’s recessionary risk, but I’d felt like very strong coming into 2019. And so I made a point of putting a cigarette company on there, a liquor company on there and that’s just not the environment we kind of saw play out in that. Certainly not the environment that we’re seeing in the euphoria of the stock market in the last couple of months. So constellation, all true groups, all true, the cigarette company, but it wasn’t just cigarettes. It’s the concern about Joel is the concern about uh, you know, the e-cigarettes and vaping products and whatnot. We think there’s going to become regulations coming into that. So constellation and Altria both being removed, the Walmart being removed from the list and again, it really good performer, Walmart up 27.5, 8% last year. Average cash flow about 1.5. It just, there was some really tough cuts. There were some really tough guts and Walmart was one of them. Starbucks being removed from the list, valuation concerns, toll brothers being removed from the list as well. And a toll brothers. I mean you want to talk about a difficult conversation between Polti group toll brothers, DH Horton and so on and so forth. They were all so just all really, really, really good stocks. All really good valuations, all performing very, very similar. A da Jordan just decided to say, okay, you kicked me off in 2018 or excuse me, you kicked me off in 2019. I’m coming back for the 2020 cause DH Horton is just doing absolutely amazing. So that’s kinda, you know, kind of the stocks that were removed, the stocks that are maintaining, uh, multiple years on the list. And this means something to us. When a stock stays on the list for multiple years, you’re Mont mining Newmont mining. Okay. So let’s, let’s talk about the stocks that are staying on the list. Here’s Newmont mining, just it is our favorite gold stock. And there will never be a time where there’s not a gold stock on the tackle 25 and so when you’re evaluating, and a lot of this is is not only looking at the individual stock fundamentals, but it’s really comparing these companies against light companies within the space. Tim and so you’re comparing Newmont against other gold stocks, other silver stocks, other mining operations and and Newmont. Just you know there were, there were some discussions but at the end of the day it’s like why would we move it? It’s it’s the best performer, it’s got great valuation and even though the price, I mean Newmont went up 28.52% last year, even though that’s the case, you still have a good PE ratio on that and that’s something that I want you guys to really kind of think about because when you have a stock go up 2030 40% in a year and it still has good valuation, that means earn or that means revenue and earnings are staying up with the price. That’s a really positive sign in my opinion, a new monster there. Obviously Microsoft, Microsoft has been on this list since the inception of this list and uh, you know, I, I don’t know what would have to happen for re for me to remove Microsoft. Maybe bill Gates gone, maybe Ryan. Um, but outside of that, Microsoft banner year 55.2% PR 55.26% performer, Apple never, never removing, not happening. Great fundamentals, great valuations. It’s gonna maintain on the list. 86 point 16%. By the way, it was not the best performer. Tim, you had a, yeah, and I was tracking this today because I’m always interested in worst-performing festivals. It was so close. I’m not kidding. Intra day, Tim intraday, it was Claus and the winter was applied materials, applied materials on the list for the fourth consecutive year, Apple on the list for the fifth consecutive year, apply and materials up 86.44% versus Apple at 86 point 16%. Both of them to art maintaining on the list. CSX corporation. I love buffet and I, and I’m a kid at heart and I love railroads. I still, even though it underperformed some of the other stocks, only up 16% on the year, on the year. Really good cashflow still. And I still like the fundamentals of CSX Boston science, this little Turner and burner just this is his third year on the list. Now love this company’s my favorite healthcare company. I didn’t see anything in the data fundamentally to uh, to kind of change our opinion even though it does have a little bit of valuation concern. It was such a good performer last year I felt like even if we go sideways this year, good cashflow, good dividend there. So Boston science and, and, and, and I still believe they make robots and I still, and I still believe that’s one of the things that is going to who I is going to be a growth area of, of the marketplace. Next one that maintains JP Morgan. Jamie diamond is he knows how to make money and so to JP Morgan best bank, in my opinion, and I know I just said best bank, let me put it like this. They’re the best of the worst. Okay. Kind of like the dollar. The dollar is the best of the worst currencies, right? Well JP Morgan in my opinion is the best bank out of all those banks. They’re on wall street, Valero. I’m a little concerned about oil next year. I’m a little concerned. That’s one of the reasons why I removed Exxon from the list as well. Valero, this has been multiple Valeros I think been on the list for the last five years. Oil servicing companies. Guys, one of the things that you gotta understand when you trade oil, when you trade oil based stocks is drillers go in line with oil service companies do not service. This can do really well even when oil does bad and I just kind of feel like the, the supply side of the equation in oil is going to kind of be dominant next year I’d have oil projecting going down. I believe you did as well. I believe Noah did as well. In fact, in our prediction podcast, I think it was only Gino who really kinda thought oil was going appreciate. And even at that he was a little concerned about supply side mechanics as well. So, but when you’re dealing with Valero, Valero is not, that layer will beat to its own drum, really good, fundamentally good company here on Valero. So they’re maintaining on the list. CarMax, Cemex, Cemex, even though it’s had a, had a negative earnings report just recently. But remember, we do not remove companies from the list just because of short term volatility. This is a longterm investing stock list. This is not a, a, this is not a swing trading list. This is an in stock stocks go up and stocks go down. It has to be able to change fundamentally or it has to be able to change with volatility or volume or one of the other criteria is that we put into this list. But, uh, but, uh, CarMax even even with the recent volatility, Tim CarMax still up 39 points a 76% on the year. The next two Longo lists Activision. Tim, you know we’re going to have gaming stock on our list until we probably, until we stop gaming I would say. But Activision, when you, when you take a look at EA sports and when you take a look at take two entertainment, Nintendo, you can’t do what we do in the, in the, in the tackle 25. So when you’re analyzing Activision versus take two entertainment versus EA sports, the fundamentals of Activision really stand out. The catalog really stands out. And I just believe this and I could be wrong, but I just believe that the classic Warcraft, uh, when they made that announcement and when they made that launch earlier this year, I think it’s going to be a revenue, uh, revenue stream for them, both with the retail version as well as with the classic version. So it’s going to bring back a whole bunch of gamers who grew up playing that classic version in the early two thousands to the, to the late 2000 2009, 2010 and I’ve already seen it across support, millions of subscribers paying $15 a month. Just think about that from a cashflow perspective. And not only that, but they’d launched call of duty on the mobile this year, which was a hit in China. They’re getting into China. And so when you’re looking at a, when you’re looking at these gaming companies and gaming’s big business and I think, you know candy crush, Activision candy crush, these gave me, companies are figuring something out, Tim, not everybody wants to spend $60 on a game, but they’ll spend a dollar here, $3 here, $5 there for some gypsy coins on candy crush or this nice little gear on call of duty or whatever the case might be on work graph. And it adds up over time. And what we’re finding is that these gaming companies are actually making more money over time with what I call microdosing financial transactions. I gotta tell ya. Yeah,
Tim: for Christmas, my kids literally, they’re 10 and they’re eight and they and your, your daughter’s the same age and they play, some iTunes games. They asked all of their aunts and uncles and all that kind of stuff for iTunes gift cards
Matt: and all they’re going to do is spend it on roadblocks. They just want to spend it on it, on the games. Yeah, it’s going to be roadblocks and it’s going to be $5 here, $10 there, an Activision. I mean they are doing a really good job of that in this space. And so I really like Activision. And then I don’t know what Bobby Gordon Disney would have to do. Apple would be gone before Disney Microsoft would be gone before Disney. I just have so much belief in this company longterm, just longterm. This is not a swing trading company. This is a get paid. The dividend cashflow capture 2% ROI, let it grow when it wants to grow and uncover it. But you know, Disney’s gonna maintain on the list. So with that said, Tim, let’s take a look at the tackle 20 and before we get into the actual tackle, 25 I do want to show you guys the process that we go through.
Tim: Okay. I think this is the interesting part by the way, because as a part of it, you’re the one leading all of this process. I mean mad, it’s not like we start with a hundred companies and go down to 25 right?
Matt: No, no. In initially starts with me running scans in in Thinkorswim is what it does. And the initial list is put together based on me running, you know, just basically three, four, five different criterias, liquidity, volume, you know, some of the minimum standards that you need to be on the list. Right. And so basically what that does is it therefore then breaks it down to basically about, I think it was about 1200 stocks that, that I went through and in putting together, so this was the first cut. And you know, I’m looking at a lot of different numbers as I’m going through these line items. And obviously you see me, Mark and some of them green, the ones that kind of stand out to me and the ones that are going to make it to the next cut and so on and so forth. And typically speaking, we’ll have about four to five cuts, you know, as, as we go through this processAnd so that’s what it really kind of starts out at thin air for them.
Tim: I’ve got a couple of questions for you and I, first of all, welcome out everybody. It’s great to have you guys on a new year’s Eve. Happy new year. We’re going through the tackle 25 tonight with coach Matt and Matt. What’s an automatic cut? What is something that would come up in the data that would say instantly that that’s not qualified Implied volatility? The Ivy? Yeah, they gotta be, it’s too crazy if it goes up and down too much.
Matt: if the IB ranks of, but like typically speaking, Tim, I’m looking for IB ranks in the 20 to 40 range. You know, I bumped it a little bit this year just because volatility is so low right now. But that’s typically what I’m thinking when I’m looking at is, is in that range. And so I’d be ranked, we’ll, we’ll definitely remove out a lot of these stocks of volume. You gotta you got to have volume. You’ve got to have liquidity.
Tim: That’s why Nintendo you were talking game isn’t qualified simply because it doesn’t have the weekly options or the liquidity. Right?
Matt: No, I, I like the company. Yep. Yep. I liked the company. Um, it doesn’t have to have weeklies, but it kind of does. Right. I mean we’ll make an exception here or there if it doesn’t have weeklies, but you know what company in 2020 doesn’t have weekly awesome shit. Let’s get them. Let’s get them.
Noah: Don’t make your list that exactly.
Matt: Exactly. So I’d say volume, implied volatility, liquidity in the options market. Um, you know, price is, is, it’s priced is not a killer. But if I’m looking at a $20 stock and I’m looking at a $200 stock and it’s close, I’m going with the $20 stock.And sometimes that will mean that some of those high flyers that have the ability to go to, you know, from a hundred to 400 in a year, they’re just not going to make this list. Cause that’s not what this, the purpose of this list is. And so that’d be one valuation, right? I mean take Wheaton precious metals here. It’s a company actually like it’s probably the best us a company that just focuses on mining for silver. It’s got an 822 PE ratio. Can’t do it. I mean 41 peg. I mean there’s so many different reasons why it would be there and there’s so many different reasons why it will move and it just, it just means that, I mean once the once, once the selling starts, it’s like an avalanche, right? Because there is no dividend to support it, there’s no valuation to support it. And when you’re dealing with high yield girl type companies, it’s just going to be a very difficult thing. I mean, one thing we’ve learned and yes we do learn from, from our mistakes as traders and as educators, but one thing we’ve learned from the Jacqueline 25 is we don’t want, I love Abe ne, I love him. It’s my favorite, it’s my favorite samurai, but it’s got growth concerns and, and, and AMD went up 150% this year. Man, that would’ve been awesome on the taco 25 what have made the numbers really, really stand out. But I don’t want that because AMD can be cut in half in two months. Yeah. Right. And so you know, and that’s just, that kind of goes to volatility scale and that’s what, that’s why amp, I mean, and let’s, let’s face reality tim we created a dirty sexy money simply to put AMD there and annex. Yeah. And you are still, and you still go over there, you’re just going to remind me of that. You are still on is all you want to do there buddy.
Tim: Well and there’s a couple of things here. I want to remind our class out there. You know guys, there’s value in what you’re learning here. We went through a very, very intense process. It’s going from a big list mat down to a shorter list into a cut. And that process is how you get there. I mean, knowing that AMD can get cut in half in two months, that’s your 15 year experience right there. You know, having that discretion to not put it on the 25 but put it on the dirty sexy money list. I think that’s important. That’s an incredible part of this process.
Matt: 25 was my baby. Yeah. I mean it’s, it’s, you know, I created it, the original one back in 14 and I just love this list. It’s, it’s been, if you compare this against any list out there, like the IBD, this list dominates. It dominates it and it’s not growth and crazy. It’s value in PEs and all that. I just, so I, I do take a lot of pride in the list. I do take a lot of care in the list. Um, but that first cut’s not hard.
Tim: How many were on the first list?
Matt: About 1200. So what we’re looking at here is the version two after the first cut, is that right? Yeah. So basically when I’m going on that first list, Tim, is, I’m literally just kinda going through it and I am just streaming, just the eyes left to right, just going through line item by line item. And if I see anything concerning, it’s boom. Gone. Yeah, I mean high PEs, high peg, you know, EPS, trans, you know those stuff. So I mean 90% is going to be cut just in the first cut is 90% it’s kinda like Tim. If we went to try out for the NFL team, it wouldn’t be hard for them to cut us. We would not make the first cut. We want to make more at 40 I’m not Tom Brady, so I would not know if you want to have some high school stories, buddy. I did have some hospitals. You know that one time in the playoffs when I had three, four catches, 157 yards. Ooh, you’re over the years by them.
Tim: I’ve got a really great high school football story. One time there was a 16 year old boy. I had a dream of the varsity team and then as big brother lady Mount over the middle in the very first practice it says
Matt: nonsense. Okay, this is nonsense. The only time in our high school that’s ever happened that year, I was a senior. You were a sophomore and they want to let the sophomores practice with the Barsi club and I was so upset because I wanted to welcome you the the the justice way. Then we made the playoffs and the sophomores had to practice with us. We were running seven on seven drills. I was a safety, Tim was kind of running shadow shadow Roger Seaver. He ran a little seven yard cut pattern. I came in shoulder first and I put him on the dirt.
Matt: I think you even told the backend quarterback, Hey, throw it a little high and I’ll throw Tim. The coming down, coming down to the second cutting does start to get a little harder because you’ve really got some good stocks here. And again, that second cut came down, I believe it was like 150 or something. Yeah, 144 stocks. And you know, there are, I’m looking at Kate, do we have enough service companies? Do we have enough tech companies? Do we have enough industrial companies? Do we, you know, I’m really not only comparing the individual stock, I’m starting to compare the list against one another is what I’m really doing. So I’m looking at all these kind of material stocks. I’m saying, okay, here’s still here. Oh well here’s, here’s first majestic, here’s we, and here’s this, here’s K, I’m starting to compare that against like-minded companies. And then after I cut that list down, that list them will come into this list. And basically at this point in the game, I start color-coding everything. And this is where Tim, you and I just sat there and okay, we went through all of the ones that kind of made that, that second cut and that second gut, Oh, excuse me, we went through all the ones that made the first cut and we just get, okay, this, if we’re going to put it, here’s dirty sex and money, here’s, here’s poor boy covered call, here’s a tackle 25 and so we’re identifying where the stocks, what stocks go on, what lists and what stocks are getting acts based on that. The red means they didn’t make the cut. You know yellow, I believe that was dirty, sexy money. Green was tackled 25 blue is a blue as a dividend dividends and orange, orange was poor boy covered call. So that would be the second cut is when we’re identifying, okay the stocks that made the first cut, what lists could they go on and what stocks just don’t have the fundamentals necessary to do what we need to do. And then the next, the next list here, the fourth version. Yeah, the fourth version here is where we really start to kind of break it down. And this is where Gino, myself know and Tim got got together and guys this was a marathon that day. I mean just an absolute marathon and we’re wriggled through each one of these stocks and we’re eliminating which ones were eliminated. And it brings us down to 33 stocks on the tackle, 25 it brings us to, I believe we had 26 stocks on poor boys. We had 20 to 21 on dividend and we had you know, 15 on on on the DSM list. And this is where the real cuts happen, right? This is where it starts to get difficult because you’re cutting stocks you like one way or the other, whether you invest in them but you might like them, right? And so you’re cutting stocks you like. And so we start with the tackle 25 and we start breaking these down and say, okay, let’s, let’s vote, let’s vote. And that’s where it comes into. And Gina, myself, Tim and, and, and no, we’ll vote, we’ll have discussions. We’ll, you know, Gina, we’ll break down how he sees it. No, we’ll break down how he sees it. You know, basically in that meeting I was just kinda set back on you guys already. You do the analysis. I already know. Right? And so I was just kind of leaning back just listening to you guys like that.And finally,
Tim: after all of that tin, no, no, no, stay there. There’s things I want to, I want to look out here and kind of point out a couple of things of value for people who are out there. Might be new to the tackle. 25 tried to figure out how to use it. Go to the DSM Tam down there real quick. Something grabbed my eye here that I thought was incredible. Look at the market cap, Matt. You know, people might hear DSM, they might be thinking these might be small companies and all that kind of stuff. These are still 40 billion, 50 billion, 7 billion, $11 billion companies. I mean, these are still established mid cap, large cap companies that are liquid option. Large, trainable.
Matt: Yeah. They’re mid to large. And, and I mean, you’ve got to find, you really got to hunt. I mean, you’ve got to get the bird dogs out there and you’ve got to hunt for these because there’s a million of these types of stocks I mean, just an absolute million of them. And you know, I mean there was, there was some easy cuts, you know, on, on, on this list and there were some difficult cuts on this list. Um, but yeah, I mean when, once it comes down to the, that last tiebreakers type scenarios, you know, we’re, we’re just, we’re splitting hairs you know, and, and some stocks that are really, really good stocks didn’t make the, just didn’t make the list. Well, when you go from 1200 to 55 final stocks, there’s going to have to be some really tough points that is going to happen. And here is the list, ladies and gentlemen. Yeah. Yes. We will be sending this out to everybody, I believe tomorrow, tomorrow in an email, maybe on a, on Thursday. The, the new, the new ones that made the list. I mean, obviously we’ve already talked about Newmont Phillips 66.Uh, you know, like I said, I, I just have a feeling I got a feeling about oil and I could be wrong, but even if oil goes up, Phillips 66 of where it can be good if oil goes down, they’re typically good. So I just like the probability analysis on one of these. I, I wanna do them both, right? I mean, if you’re picking 10, 10 stocks to do covered calls on longterm investments, you certainly don’t want to in the same space. But, uh, both of these two companies, just absolutely fantastic companies. Mine the one I like the most is, is Valero out of the two. But I wouldn’t fault anybody for Phillips 66. I mean, it is actually a bigger market cap company. Uh, then, uh, then, uh, of Lero as both have really good valuations here, right at 11, right of 14. Peg ratios are good. Both pay a slight dividend, but not much. Uh, new newcomer to the list. A little surprising little surprising. Uh, Lulu. Lulu made the list. And, and when I’m looking at the consumer good space, Tim, and, uh, when I’m looking at this, this as, as they macro 64,000 feet in the air, there’s only two companies that stand out to me. There’s only two companies that stand out in the sense that they’re going to be here and they’re going to be here forever. And that’s Lulu and Apple. And I believe it was Noah. I mean Noah was you that went to the, uh, went to Christmas, you went to a
Noah: I took my annual, my annual trip to the mall. I go every year, the holidays like sometime around Christmas Eve. And you’re going to get that shopping in? Um, the only two stores that were, I mean literally it was jam packed. Like it was like, I mean you had to like lift your arms up to move between people. Like it was crowded. Yeah. And Lulu lemon and my daughter who was, who’s got a little bit of, you know, um, at Gore a phobia and when she gets out into crowds, like she didn’t even want to go into either store and that’s the only reason she came to the mall with me cause she wanted to go into the Apple store to get some new AirPods and she wanted to go into Lululemon cause she had a gift card to get some, some, some pants. And I’ll tell you what, jam packed like sardines. It wasn’t, it was insane. Every place else though, ghost town,
it goes down. The mall in and of itself is kind of a ghost town. Like if you have to leave the house to get stuff in 2020 you did something wrong.
Tim: But there’s several parts of that story though that are anecdotal in nature, but obviously very valuable. Number one, brand recognition, customer loyalty, you know, and both of these brands, people who love the brand, people who love Apple, they buy Apple all the time. I do
Matt: Tim, if family doesn’t know, is defining is what everybody did in the 80s and I mean this is when Benjamin Graham’s version of value investing. First kind of modifying change was in the mid 1980s with Peter Lynch. And basically what was happening is, you know, a buffet and, and Benjamin Graham would say, okay, yeah, you can invest in things, you know, and companies you like, but you have cognitive bias. Right? And so it was like, it was almost like a warning to don’t invest in companies you work for because you haven’t, you, it’s hard to, it’s like you have beer goggles on constantly. Right? And then, Oh Peter Lynch comes in the 1980s like, Hey listen, go, go to the shopping mall, go to the strip boss, see who’s going to those stores. If you see a store at this factory, you see a store that’s not well, I’m willing to bet the revenues of the Lulu and Apple are going up. And that’s exactly what’s happening here with Lulu. And even though Lulu for is specifically Lulu, it’s got a little bit of a high valuation right now. A lot that is, cause it’s up a hundred percent year to date, right? So at 54 valuation, that is slightly higher than what is typically allowed to a to kind of have on the tackle 25 but when you’re, when you break down the fundamentals of this company, Tim, I just love this company. I just, I, I see this company and I, it’s a profitable company. It’s a darling of the market. You know, obviously we’re stagnating in Lulu right now, but EPS projections in the last five, all positive APS projections in the next five, all positive. I mean this, this, this is a company that has the ability to truly dominate the clothing apparel, uh, the high end clothing apparel type, uh, type, uh, uh, space. And I just think, you know, it’s, I, I, I honestly thought it was going to be a year too soon with Lulu, but it turned out to, to make the final cut. I really like
Tim: stay there for a second because I think there’s a great question. Hopefully it’s a great question. What role does charting playing? Because if somebody’s just looking at this, they’re like, that’s beautiful. Obviously, you know, you know, the fundamentals behind it, how much of a role that actually plays, but somebody might be out there thinking, well, that’s a beautiful chart that is that the reason it’s on the list? How does it play a role? What role does it play? All that kind of stuff.
Matt: It plays a role. I mean, we’re not going to add a stock that’s just getting absolutely just slammed. Right. Um, but, and, and to certain coaches, it might play a more of a role than it does to me. Um, I use technical analysis as a tie breaker type scenarios. So if I’m looking at two stocks of equal fundamental nature, uh, then yeah, I will absolutely say, okay, the, the stronger trend, the more consistent trend is what we want. Uh, when I’m looking for trend analysis and technical analysis in general for stocks that go on to 25 jam, I’m looking at consistency and patterns, consistency and trends. I’m looking for something that isn’t random and volatile and can shake you out. I’m looking for a stock set, you know, you can trust, you can trust on the technicals, but you know, it, it’s tiebreaker, it’s consistency and patterns and trends. I don’t want to see too much volatility, you know, those types of scenarios. And it kind of goes back to the growth versus value discussion. You’re going to have more volatility and growth companies and you know, Lulu is a growth company. It’s not a value company yet, but there’s a mix there. Obviously on the 25 there’s some growth and there’s some, there’s some value there. Um, but I just believe this company will be a value based company at some point in the, in the, in the future. The forward P ratio, which I don’t give too much credence to, does, is projected lower than the, than the actual PE ratio right now, if lose priced stagnates and the revenue catches up, that P ratio is going to come down really, really quickly. So I’m not that concerned about valuation on a company like a, like a Lulu, uh, bacon New York, the bank of New York Mellon corporation. I’m not surprising it made it, made the list. It’s been evaluated, you know, in, in, in it. It’s got through multiple cuts in previous years. But I’ll tell you what, this company like, I wanted to kill it. I did, I did because everybody knows how, I don’t want to say motional, but I do have bias towards the banks. Right. I do have some anti-biased towards the banks and so I looked for a reason to kill it. I did, I just wanted to, I was just like, boom, I can’t put another bank or JP Morgan. Now this isn’t a bank. It’s an asset management company. Okay. So they’re not, they’re not in the same space as JP Morgan, which is a big money center bank. But Tim, when I’m looking at this and I see it, you know, 14 $2 two 71 three 15 343 94 very consistent in APS growth book value’s really good return on equities. Really good PE ratio at 13 and a chart that’s, you know, doing that over the course of the last, you know, six months. Pretty decent valuation there. I mean, but the kind of the kicker, so there’s a little bit of a tiebreaker within the banks, but we could get pretty decent 2% type cash flow out of this and it’s pretty late. But so bank of New York Mellon corporation, welcome to the first time on the tackle, 25 same thing with Phillips 66 by the way, first time or for a Phillips 66 as well. Discover’s been on the list, I believe. Maybe we usually have a credit card company on the list. Last year it was a, it was a PayPal. This year we put discover and American express and guys, I mean let’s just face reality where the fed fund rate is right now at 1.5% the average credit card interest rates 15% yeah. Think about those numbers for a second and and most spending in America right now is not done based on savings and not done based on, you know, paycheck to paycheck. That’s usually going to pay bills paycheck to Pitt. Most people in America are paycheck to paycheck. So how did they afford those luxury things? How did they afford to go on vacation? They’d go into credit card debt with an average interest rate of 15% with the fed fund rate at 1.5% you do the math, American express discover, they’re in an environment to dominate all those credit card companies are. These two stood out to us
Tim: and there wasn’t a lot going on in the market today, but the one economic data point was a consumer confidence number that came in at one 26 the consumer has been very, very confident they’re using their money. Credit card companies have been easy calls for a couple of years now. DFS is one I really, really liked. Fundamentals on love. The PE ratio love the peg ratio. It’s a value company and it’s not a determining factor, but the 2% dividend it is nice. It’s nice to add to the other fundamental factors that make it a candidate here.
Matt: Show a 10, I mean a PE ratio at 10, a peg ratio at 0.93 and a dividend a 2.49. Yeah. Yeah. What are we talking about? Welcome. They list what we’re talking about. I mean, find something wrong with discover. I can’t, um, American express. It’s just a juggernaut. It’s just a juggernaut. Welcome to the list. American express. JP Morgan. We already talked about Boston. Let’s talk about the construction companies really quickly. There was a report that came out earlier this month that the construction companies, DH horn toll brothers pull day. Who am I missing? Um, KB homes toll, uh, or, and, and the NAR. Um, those all, when you’re looking at those companies, they have the highest confidence that they’ve had in the last 20 years, in the last 20 years. And although I disagree with the fan and monetary policy and think they’re running a risk to inflation and think it could be really nasty and 15 years from now, people are going to borrow a ton of money and they’re going to buy new homes. Yeah. And you’ve got an entire generation, an entire generation, that millennial generation that’s in that what now? 22 to 40 bracket. Right? You’ve got that entire generation now in the middle of there. Wow. I might want to get married. I might want to have kids. I might, I want to have the American dream. I’m going to build a car, you know, going to have an a two car garage, white picket fence, going to have a, you know, 2.2 kids and just have a fantastic life. And I want to have a home. Right? I want to have a home because I don’t want to go pay record levels of rent. Why would anybody rent today when they can borrow $500,000 at 3% interest rate. And when you think about it like an investor like that, and you see the consumer confidence numbers where they are and you see the unemployment number, where, where it is and, and people are pretty, you know, complacent and healthy economically, man, I could see the home builders being really, really confident. I’ll tell you, it was difficult. It was difficult. And, and the one that would got removed from the list told brothers, it was not even the last two of the homebuilders. It was pulled in and DH Horton, I mean it was tough to remove toll because it tells one of my favorites. But ditch horns, fundamentals eight 13 PE ratio, a 0.85 peg a 1.25% on the dividend. Looking at DH Horton here from a fun, uh, from a charting perspective, a company that literally last year on the list and it was up 89% this year it’s up like another 70% and Oh my God, it still has a picket 98. It still has a PE ratio. 13 do the math. Earnings are growing here and people are going to be buying more homes. They tear them down, they rebuilt, right? So I just, you know, the, it, it’s stagnant right now. Good opportunity. Obviously a little bearish in the short term, maybe a way for positive earnings report here. Um, but a Jorn that, you know, the fundamentals behind this company really kind of stand out, uh, really kind of stand out. As you can see, every single year, increasing earnings per shares, increasing book value, good return on equity, and you’ve got wonderful, wonderful valuations despite the stock going up over the last five years, still undervalued in comparison to the average of the last five da George, welcome back to the list right there.
Tim: There’s a point that has to be made on that because guys, a low PE ratio is not enough. Uh, if you have a low PE ratio on a stock with bad fundamentals in a downtrend, it’s usually not a good signal. So we’re not just looking at the numbers and saying, okay, that’s a 10 PE.
Matt: Here we go. We’re putting in a long time. A lot of times those stocks that have high valuations of the stocks going down, it’s because they’re losing revenue, right? It’s losing revenue. And sometimes even when they’re maintaining revenue and the valuation comes down, that’s one thing. But I mean, it’s just so impressive to me for a stock to go up as much as DH Warren has done and still have proper valuation, right? Not get into that 60, 70 type era area where, where you just, you just start to get concerned. You just start to get too concerned. Lulu is more growth. CarMax isn’t . So valuation matters. CarMax, welcome, target. We all love target. Target’s been on the list. How many years for, Oh, at least at least that. Yeah. I mean, it’s a, it’s a way, Mike, I want, I’m going to go check this, but there’s only like three or four stocks that have been on the list the entire time. Apple Disney’s, not one of them. No. Disney got removed because of a, you couldn’t get cashflow. And at one year, I think it was like 18 or something like that. Um, Apple, Microsoft and maybe target it might be target, it might be target. Yeah. Outside of that, yeah it might be target. I cause I apply materials that’s only been three years, but now target, it’s wonderful company. Really, really like it. Little, little high on valuation right now. A not too bad. Best buy made the list. It’s been multiple years on the list. Best buy, one of the big box retailers that actually started to get it right online. Them and, and you know, online spending of whatnot. They’re starting to do it a little bit better sites and deals with Amazon as well. Good, good. Valuation on the PE ratio is a 2.3%, a 2.39% dividend. You can get about 2.5% on the cashflow right now. So best buy. Definitely. Welcome back to the list. Disney, I just, you know, everybody knows my opinion of Disney guys. Uh, I just feel like they’re taking over the world. I just, everything, everything Bobby Gore does turns to turns to gold. Everything he does. When we were given the prediction podcasts and the question was, is it going to be Disney or is it going to be some other company that produces the highest grossing film in 2020 you guys all went with somebody else and what did I say? Y’all crazy. Yeah, I don’t care. You don’t know what they have coming down the bike. They can draw some animated Pixar stuff in it. Everybody’s going to go to it. It’s true.
Tim: That’s the wildcard.
Noah: Yaffe two words for you, baby Yoda
Matt: They don’t have nobody around and going to do it though.
Noah: Baby baby yet, but when it comes out, they’re to make nice merchant billion alone.
Unreal. Yeah, but the one thing say about Disney is every decision Bobby Gore has made for that company has turned out the acquisition of Hulu, Disney plus the Pixar, the star Wars, the Marvel acquisitions, everything that company has done besides ESPN. That’s the one drawback. Traditional media has been really, really struggling over the last few years and will struggle over the next few years. But I just love what Disney is doing in terms of positioning themselves to get into that Netflix space. and after two months now, I mean we’re talking tens of millions of subscribers and that’s just going to get bigger and bigger and bigger. Restoration hardware was a shocking one for me. A shocking add on for me. I never thought, cause I, I know this company only because my wife likes their products, right? I mean that’s, they’re a high end variety home furnishing company. Um, and they do, they, they do have wonderful, wonderful products, wonderful products. Uh, it kinda reminds me of that Yeti. Like people will pay a little bit higher price for Yeti because not only the quality, they just love it.
Noah: I can tell you that I once decorated my whole house based off of restoration hardware stuff is that does not surprise me in any capacity.
Tim: It was in all transparency when the last docs to make this list map, because there was some hard calls on this one because it’s a newer company, you’re talking specialty retail and it does have some volatility, but the fundamentals were just so outstanding. It just could not be in the died. I mean it just kept coming back up and backup and back up and back up. And it’s growth projections.
Matt: And I kept saying no, but yeah, like I kept saying no. I was like, I can’t get there. I can’t get there. I just, I don’t trust it. Yeah. But when you look at, especially the last three years, Tim, especially the last three years, EPS numbers going from 30 13 cents to 31 cents to five 68 to seven 74. Man, if Tesla could actually do that, I actually might support Avon, us
Tim: I mean, I know they are selling cars in China now.They’ve got a new production unit and all that. Yeah, I love it. Golf, clap on here.
Matt: You get a little violin. Um, but it’s just, it’s the, the numbers are very, very impressive. But Tim, again, I come back to this, you look at a stock that in the last seven, eight months is went from $100 stock to two 13 113% price appreciation. And look at this Tim five-year average of the P ratio 39 and now we’re rocking 28. So despite going up 113%, guess what went up even more than that. Revenue, revenue, revenue matters, value matters, earnings matter, all of that. And, and even though I, I, I didn’t get there first, it took me a couple of weeks to get there, but I did because it just the fundamental stood out and, and I just, you know, when I was breaking it against, there was about eight companies that made that last cut that we had to cut it. It was the best of the bunch. And I felt like we had enough dividend. I felt like we had enough value. Um, and I felt maybe we were short on, on, on a little bit more aggressive, uh, type company. Um, even though Apple went up 80% this year, I would not consider that to be an aggressive company. I mean there are one point what, $3 trillion company?
Tim: Well, so they have over 200 billion in cash. I mean their company is just stocked. Oh man. Oh man. Oh man.
Matt: next doc on the list, a CSX where we talked about Dick’s sporting goods, Dick’s sporting, it’s another, another little surprise, but kinda like best buy. Dick’s has done a wonderful job. Just an absolute wonderful job and grilled a little bit more of a growth based company. I, let me see if I can get you exactly what the numbers are here.
So just give me a second. Uh, P ratio is 13 Ford PCO P ratio at 12. Peg right there at about 1.5 little surprising Tim. It pays a 2.2% dividend and the numbers are very consistent and the P ratio is very good.
Tim: This is one of those big box retailers who’s also done really well online. I mean, if you go shop for some of this stuff online, Dick’s is going to be right there. Boom, boom, boom, boom, boom. Their numbers are great and the cancel here is pretty good too.
Matt: Well, and I also like a couple of things. You’re getting at 2.2% crap cashflow on it. That’s really, really good, especially in this environment guys. Once volatility comes back and it will okay these 2.2% this will be a 3.5% right? And so, and so when we’re looking at Dick’s, you’re getting 2.2% on a covered call. You’ve got a really good valuation. Um, price has been going up, but I love it in that price range, $50 stock, you know, I don’t love doing covered calls on stocks that are $200. Like, like, uh, you know, Apple is, I’d rather play it a different way. Right. Um, but, uh, in terms of dicks, I mean $50 stock really kind of priced to priced to perfection here. You know, just one thought off the top of my head. You want to stop the next recession? No, no, no, no, no. Let me put it like this. Yeah, yeah, no, I’ll, I’ll say that. You want to stop the next recession. You don’t need to pump in billions of dollars of liquidity into the market fed. You know what you need to do. You need to have Apple split four to one mm. You need to have Google split 10 to one. You need to have Amazon split 12 to one. You need to have all these high end companies that have made so much money over the last few years. You need to just have them split. Put them on a discount. Yeah. People want it. People won’t even understand it. They’ll be like, Oh my God, I can go buy Apple now. You know, 20 bucks. Yeah. $12 yeah, whatever. The split would be seven, the entire market split. Just my remembers,
Tim: I remember when Apple split seven and one it created demand instantly for the company, especially when they’re fundamentally strong like that.
Matt: It would be a really, really, what was genius about it because they started doing this whole marketing campaign about Oh $92 a share. You can buy a share of Apple before like it’s just that there’s things that they do to trigger emotional responses within the consumer base. Yeah. The reason they split seven and one is to get an under a hundred dollars so that they could see demand come in at that double digit and so the triple digit, it’s the same reason why Baidu many years ago split 10 of one right? I mean just to get it out if they wanted to underneath that single digit and then all of somebody went back up to a hundred dollars splits or bullish splits are bullish. That’s all you needed to do now. All right, Jack Dick’s wonderful company. Welcome to the tackle, 25 Facebook. Now I’m going to let you talk about Facebook cause I hate this company and my bias will absolutely come through, but the reason I hate them is probably the reason why we put them on the list is simple.
Tim: By the way, I hate the company too. I would love to not have them on the list. They’re just too damn good of a fundamental company and you’ve got a 2020 factor here.No one made a really, really strong point, guys. We’ve got politics next year that are going to drive ad spending and all that kind of stuff. I mean, you’ve got a presidential election, the numbers are just too good, man. It’s all, it comes down to at the, at the end of the day, there’s no emotion in investing. It doesn’t matter whether we love or hate Facebook or use Facebook, Facebook as a company for a covered call at $570 billion. They’re just a good position to do coverage.
Matt: And the reason I hate Facebook has nothing to do with politics to be honest with you. Um, you know, if people are going to be influenced because of a 32nd nonsensical ad on Facebook, then they got more problems in their life than I can deal with here. Um, so that doesn’t bother me at all, but it’s, it’s privacy and the privacy guy, I’m a privacy Hawk. And when you, when you basically sell our third party data, our private data, the third party apps. Um, I, I just, I, I’m out and I, I felt like there was going to be more backlash to that and there wasn’t. We, we didn’t see it in the numbers. Usage went up, subs went up, everything went up, advertising revenue went up. Um, and you know, uh, I believe it was a no, Noah, I believe. Oh no, Tim, in 2020 when we were talking in the prediction podcasts about what sector you felt was going to be the best excommunication communications,
Noah: it was me, Tim and Gina.
Matt: We thought it was tech and can I add it too? I had it too. I had tech one and communications two is what I had. And I think you had tech one and communications two and Gino had communications too. Um, and then Tim was like, I love it all. Everybody loves tech. But man, so many good names and communications and Facebook’s one of them. And that’s like, what 20% is it 20 or 22% of the index?
Tim: Oh no, they’re, they’re like 19. I think Google was number one. Then Facebook, they’re right up there too. And by the way, another company who’s a top 10 holding in the communication sectors. The next one on the list is Activision gaming as well. It was one of the other why I love communications. I just see that we’re all using, I mean we’re on zoom right now. We’re, we’re communicating via these devices via this medium. Uh, it’s not going to go away, you know, and Facebook isn’t going away. You know, there’s no bullying.
Matt: You know, it’s a, I mean there is regulatory risk with Facebook. Yeah. But I do not see that regulatory risk coming in 2020 maybe down the road. Yeah. And there’s labor risk with Facebook as well, but I don’t think, I don’t think the market is priced in a positive LIBOR response. So if there’s a negative lead read response, I don’t think that’s going to
Noah: Well, you had mentioned earlier mad about having a, a cigarette company or a tobacco company on there. Um, I can’t ice company. Oh, Facebook. It is the new tobacco. Yeah. You know, it’s, it’s addictive and keeps people plugged in all the time
Tim: I still marked any offs line. He literally said that in his speech
Noah: the other, and he was pretty sure I read that. I’m pretty sure that I ripped it straight up. I can neither confirm nor deny, but he’s not lying. So I mean it’s like, you know, now this is all he called somebody out because he loves Mark Benioff. I do. And that was Marc Benioff’s line.
Matt: I mean I’ve saw, I’ve thought about it for years and it’s true. It’s one of those things, it’s just like media is the new parallel thinking you and Mark Benioff. I gotcha.
Noah: Nope, I actually read it straight up so I will go ahead and we’ll call that, what do they call that? Um, they call it crypto Nisia crypto. Nisha is when you feel like you saying something originally, but you totally picked it up someplace else. You do it all the time.
Tim: Yup. Facebook active vision. Two of the tech names obviously that we’re talking about here on the tackle, 25 math, there’s four more around these AOD Jaybil, Xilinx applied materials in Oak. Uh, kinda talk about these four as well. If you can get Jaybil,
Matt: you know, obviously we’re going to be tech and service heavy, right? Because let’s face it, most stocks in our market are tech and service, right? And so when you’re looking at JBL printed circuit boards and so on and so, uh, so far it’s got good valuation of 31 Ford P ratio at 10, uh, pays a slight dividend, right? There are 0.77% EPS numbers this year, 32% EPS. Next, uh, EBS numbers over the next five years, average at 12%. Uh, fundamentally pretty strong stock in a space that you know, is gonna is going to be a, and this is just my opinion, but I think the entire information, print circuit boards, any, any type of semiconductor, any type of cell phone provider, internet provider, I think is going to be an amazing ride over the next five to 10 years. Because of the transition from four G to five G is happening [inaudible] and that’s a really, really big deal, especially as we start getting into more smart cars and, and, and you know, the speed of information that that and, and crypto currencies and, and you get into any, you name it. So obviously we’re going to be happy here in this space with uh, with JBL, but a wonderful, wonderful company. A little bit of a surprise that thought it would be a little bit more dirty, sexy money, but it had the fundamentals P ratio of 23 peg at 1.9 3.8% dividend, little bit of a smaller company, $6 billion company here, but uh, keep an eye on this company. JBL, let’s take a look at JBL very quickly from a technical perspective, looking at this from a technical perspective, very consistent in the trend. I actually kinda liked this from a swing trader to be honest with you. That trigger above 42 stop loss right there underneath 41. That’s pretty good. Decent little swing trade right there. Uh, but a very consistent and Trent priced priced at $41 for covered calls. I mean, people love that 20, 30, $40 type stock for covered calls. Uh, volatility right there at 22%. Again, I do believe that all those numbers are going to be going up, but you can get about 2% on that cover call right now for a very safe, a safe little company. Next on the list we got Xilinx, Xilinx, another semiconductor company, and I’m going to tell you, Tim, we broke down about 10 semis apply materials. There’s one a one B, one C, one D, right? I can’t believe Mark was surprised. So when you said applied materials as he never listened to me talk about applied materials,
Tim: I’m not sure how much he listens to, to anything besides his dates lately. I mean, he is single task focus right now.
Matt: There’s no doubt he really is, isn’t it? But both these two companies, they’re semiconductor companies, but xylenes is more integrated circuits. Okay. This one’s more equipment and whatnot. Both these companies are really, really good companies. Fundamental strong companies. Peg ratios. Valuations are getting a little concerning just because price has been going up so fast here. So keep an eye on both of these companies and then we have to have a utility company have to, it’s a must it, I cannot not put a utility company on there or it breaks rules, right. Diversification type roles and oaky is, is the best one out there. It just is by far. There were other companies like Southern, which were really, really, really good. Um, for Tino, that’s, that gets a yellow card buddy. And the only reason it doesn’t get red cars cause it was funny. Yeah, it’s funny I said no, that is, no, no, no, no PCG and for judo hates BCG by the way.
Tim: You know, by the way, by the way, that’s our tackle 25 we’re going to go through the other list here in just a minute, but in the chat right now, first of all, it’s great to have you guys here on new year’s Eve. Like I’ve been saying all night, happy new year. Just type in tackled 25 in the chat. Let me know that you’re out there and a couple of things. Matt, we did have a question come in the Q and a section. Noah repost it here. I think it’s a very good question for right now because we’re going to be talking about the other list and it says it’s from Mark and it says why are there different lists on the tackle? 25 referring to the touch 25 dividend fireworks for boys cover calls and the dirty sex and money. But we think,
Matt: um, well the of 25 is our, is our list. I mean that, that’s the list. There is no other list. But what would found over time is that there was a demand for other type of list. And what we found last year was there was a couple stocks that we removed from the list because they got, they just got too high priced right. And we just like, we got, you can’t remove that from the list. They we’ve got to find somewhere else to put it right. So we’re like, okay, high dollar stocks that meet the criteria is of the tackle 25 we put them on the poor boy cover call list. So instead of focusing on covered calls, we do diagonal spreads, horizontal spreads, a lot of people do credit spreads too, right? And so, so vertical credit spreads so that there’s, there is some subtle differences between the tackle 25 dividend fireworks and poor boy covered call, but they’re the same fundamental criteria
Tim: why he kept saying, and by the way, just to make that point even further during our analysis when we were breaking it down, refining it, refining and refining it, you can’t remind the team guys, it’s gotta be qualified for both list. If it’s not qualified to be on the 25 it can’t be on the poor boy cover call period. You know, he has to be qualified with the same fundamental criteria,
Matt: approaching it with the same same scenarios, right? Instead of buying the stock, you’re buying an underlying call option, a longterm option. You’re writing that same call option against it to create that diagonal spread. So you know, you’re just, all you’re doing is substituting the longterm option, which you’re planning on holding for the next year and selling that short term option. It’s, it’s very, very similar. So for me it was very important that to make sure that whether it was dividend fireworks or whether it was poor boy cover color, whether or whether it was tackled 25 I mean you had to have the same fundamental nature. Um, so I mean the tackle 25 is the list. I mean that is our primary list. And the other list we created just to kind of fit different mindsets, different demographics, different portfolio designs and so on and so forth. So when you’re looking at poor boy covered call here, one thing you’ll notice about the poor boy covered call this is, most of these stocks are extremely, not extremely, but they’re a little more high end, right? The valuations can be a little bit higher because they are a little bit higher price. But you know, you’re looking at Nike, Anthem, visa, Lockey, Martin, Costco, McDonald’s, tractor supply, Salesforce, Nvidia and Baba. And with Salesforce specifically, it did have too high of a valuation for us to put it on the list, but when you actually look into some of the numbers there, you can kind of understand why it has a short term high valuation. I think that will change and Salesforce is just a company we believe in based on a guy that we both have an absolute love for and Mark Benioff, so, so the difference in this list versus a 25 is these might have a little bit higher valuation than the 25 they might. Dividend really doesn’t matter because we’re not buying the stock here, but you’re really, you’re just talking about a higher dollar stock, right? Still fundamentally strong companies still the brands you love, but just a little higher dollar stock when you’re looking at dividend fireworks here, you know this list is fundamentally very similar to the 25 I would say very, very similar. Whereas I’ll, I’ll kind of get into the gray area on valuation on poor boy covered call, I’m not on dividend fireworks. The differences between dividend fireworks in the tap of 25 are subtle but important. Number one, you can not get on this list and unless you pay at least a 2% dividend, that’s, that’s number one. You can, we will have gross stocks on the list guys on the top of 25 so when you’re, when you’re looking at the tackle 25 and you’re seeing, well Matt, there’s no, Lulu doesn’t pay a dividend. Boston doesn’t pay a dividend right now. Boston get your act together, pay a dividend. CarMax doesn’t restoration hardware does it? Cause typically those are more growth based. But when you’re looking at the dividend fireworks list here, Tim, look at dividends across the board. Two 3% that’s 3% 3% 2% 3% 2.5 4.7 4.44 5.3 4.09 and so yeah, just because a company pays a 5% dividend does not mean it’s a good buy, right? You really got, because sometimes you know, stocks will beg for, for, for, for buyers by increasing dividend. But these companies are really, really fundamentally strong companies. They all have really, really, really good valuations. All of them are under their sector valuation. Um, you know, peg ratio is a little out of whack right now, but P ratios are perfectly online, dividends are fine. And you’ve got ExxonMobil, you’ve got Coca-Cola, make them America, all three of those stocks. Pfizer, all four of those stocks, home Depot, all five of those stocks. Las Vegas sands, I’ll say all these stocks have been at what point on the tackle 25 other than Southern Seagate and I believe Las Vegas sands. Yeah. I think those are the three companies that have not been on there, but Las Vegas sands. Oh man. Fundamentally really strong stock and it pays a 4.49% dividend. And we were looking at, we wanted to get one of those gaming companies, the casino companies on, on one of the last, and you know, we looked at Las Vegas sands, we looked at a, the wind resource. We looked at, uh, MGM. Those are the three companies that we really kind of broke down. MGM had valuation concerns, fairly, fairly big good cashflow. But valuation concerns Las Vegas sands is, is out of those three, in my opinion, the most fundamentally strong stock, right? And when our pays a 4.49% dividend or 4.71 I mean, just sign me up already a P ratio at 19%. So with the dividend fireworks, the cashflow rate is going to be slightly lower then you what you’ll get on the 25. Okay? So you might get an average of 2% right now on the 25, again, once volatility picks up, it’s 2.5 to 3%. Um, but with dividend fireworks, you’re right now 1.2 to 1.5% on, on, on the cash flow rate, that’s, that’s what you’re getting by selling the call option to bring in. And so when you hear us say something like CFP or the cash flow rate, um, cashflow expectation, cashflow rate, that’s just based on, okay, if I, if I buy a stock for a $10 and I received 50 cents on the call option, that’s going to be $50 versus a thousand dollar investment. That’s going to be a 5% return on investments. So your, your cashflow expectation would be 5% so when you’re looking at the 25 you’re, you’re looking right now between two and 3% on the cashflow rate. When you’re looking at the dividend fireworks because of the dividends, these are all value stocks is what these are. Every single one of these are value stocks. You’re going to get 1.2 to 1.5 and 1.5 to 2.2 and in a more volatile environment, but you get paid that really, really nice hefty, hefty, nice little led dividend. And these stocks don’t have a tendency to move as fast as say poor boy or or, or the the tackle 25 so you don’t have a lot of management. It’s kind of boring watching paint dry on a wall type type scenarios then, but you know what? We want that. We want the sexy in a portfolio, but we want more boring in a
Tim: point at times of onboarding.I was just going to say that, I mean a, you know, the reality is when we’re sitting there talking about it, we had a you and me and Matt and Mark and Noah and Gino. We were finalizing the list. I think Mark got most excited about this list, you know, because of that’s the style of investing.
Matt: He does his style. But I will tell you once we finalized dirty, sexy money, he’s like, Oh my God, that is both.
Tim: Both cause the other one is great for the boomerang stuff. I mean, now that DSM list, there’s a lot of ways you can use this
Matt: and so many different ways you can, you can use this list naked puts to cover calls in the boomerang covered calls, um, credits. There’s a lot of ways you can approach this list. This list is a little, it’s, it’s unique. It’s unique because these stocks are not fundamentally strong stocks. They’re just not either one. They’re negative PE ratios, they’re debt driven companies, but a lot of times companies are dead driven for years before they turn, before they find that path to profitability. And I agree with lane on the, on the, on the dividend fire was great for retirement accounts, great for retirement accounts. Um, I would say these are companies that number one are growth based. Okay. So they have higher upside and higher downside from a growth perspective. Um, number two, they have high, uh, Ivy ranks, right? So typically a stock on this list will be, you know, typically above 40 on the Ivy rank. I think now it’s above 30, just because I had to adjust for volatility where we’re at with volatility. Right? I mean, you, you can’t force your will on the market. You have to adjust to what’s going on in the market. And so I adjusted the volatility, but I do believe volatility will come back. You know, 2019 was fantastic, but it’s now in the rear view mirror. Let’s fast forward to 2020 2021. Um, I would say the primary thing is, is high volatility growth stocks, stocks that we believe in right? stocks that, that, that for one reason or another, we just believe in that, that we believe in the path to profitability. We believe in the, uh, kind of what they do. You know, as a stock within that space. You is still is just my favorite. I mean this list was created for us still on AMD, but us still is just my favorite. It’s my favorite steel company and it has wonderful cashflow and it’s, you know, it’s, it’s a high flyer. It can shake people out, no doubt about it.This list is not for the faint of heart, by the way. No, not at all. I mean [inaudible] for retirement accounts. No, this list is for cashflow accounts. Right. The question I have for you and no, I, I want to get your take on it because you know, Pinterest, I think Pinterest, short term volatility aside has a path to profitability. People go to Pinterest for marketing. They don’t go to Facebook for that. They hate ads, right? They don’t go to Twitter for that. They hate it, but they go to Pinterest for marketing Yeti. You guys just talked way too much about Yeti. And then I talked to my wife, she loves Yeti and then I looked into the stock and I love the stock. So there’s Yeti Roku. That’s you buddy. That’s your unconvincing. Yeah. So, so for all through, doesn’t work out next year guys. You know who to blame on this one. Listen, I’m a believer, I have my GoPro. You might have your Roku and Yeti. I love Yeti. I love all these names. By the way. Zoom. We’re on zoom right now. Yeah, right. Like Adobe, Adobe connect was the one that kind of started at all. And, and, and what was the black, I can’t remember the company. A lot of universities that zoom is so simple and so easy to use and I just think it’s so much better than what Adobe is doing. And so zoom is one of those companies. We obviously believe in lift, you know, they fit the space, they fit kind of the gig economy. Um, I like Lyft more than Uber, but I don’t like anything that’s happening in either one of those companies right now. Wait for the volatility to subside. But I do believe one of those is going to be really, really good long term. Uh, Slack. I mean, I, I, this is my belief. I believe Slack is changing the way corporations communicate. but I believe, I mean guys, like I hate my email. I utterly hate my email because why? Because you get a million, a million different things you don’t want to get. Right. I woke up today, Tim and I had 120 emails in my email inbox and guess how many of them were legit? Dude, it happens all the time.
Tim: I see it all the time with students as well. They’ll pull their laptop up. I’m mentoring, I’m coaching. I’m like,you have 5,000 emails. What’s going on here just to lead it? Let’s get a new email. Let’s start fresh or something fresh. But that’s one of the Slack though, you know, and we use it internally for communication. You can go to Slack and you can get your work done. I mean, it is a wonderful, wonderful product. And by the way, I know that Microsoft fans are out there like, Oh yeah, we’ve got this version two teams or whatever. Yeah. That’s why the Microsoft is on the tackle. 25 K a slacker. They can both exist. I mean, you can have a lot of good companies exist in the same kind of realm. I gotta tell ya, I love all those names. Momo next year, Matt, a Chinese company, uh, into the, the, the dirty sexy money list here and it just has a lot of growth potential on this company.
Matt: Oh, I agree with that. And then, you know what, what did we say about AMD? It was the best performing stock in the S and P 500. It’s got high of high valuation right now just given what’s been going on. I mean, it’s got a P P ratio, one 96 and a peg ratio at five. And that’s why you don’t put all your money in AMD because it could be cut in half in a week. Yeah. Yeah. Right. And so and so these companies are growth based that we believe in and people use it for a variety of different ways. I use it for boomerangs is what I use it for. I think that’s how Mark will use it. Actually Mark might just say, I’ll do boomerangs and take my 1% of walk home. Um, but uh,
Tim: so those are who does a lot of AMD, uh, as well. And I think it’s because entire community, everybody. But Sylvia actually told a wonderful story on the podcast about that one where she did that for her Stewart account for her grandson. You know, where that’s all she’s doing is like boomerangs on AMD. You know, it’s, there’s a lot of great ways you can play these lists. And by the way, the spreadsheet, we had converted with our power team on the back who makes everything look pretty. They actually built this PDF as well, Matt. So people can download this and print this off and actually just have it right there on their desk and they can get that right on that post. I believe there’s a lot of factors that go into it. And one thing I really love about the process, Matt, is that, uh, you know, as you kind of lead the team through the process, you always bring in no way in Gino and Mark and myself and get input. And then that refinement of where we go from the big list to a smaller list, then discussion, then debate and then a really looking at it through a lot of different lenses. Then we finalize the list, you know, and uh, by the way, it’s not a final for the whole year. If there are extreme things that do happen. And we did have a one stock we had to remove last year, you know, we’ll do that on a quarterly basis where we’ll evaluate it. We don’t make a lot of changes though, Matt. And when we do make changes, we always document it. You know, we put it out there and we really can, uh, very much hang our hat on our record on this one. We’ve had that list out there, what now? Five years and it’s had a really 14 or 15, so I can’t, I don’t routinely guys, happy new year. Great job tonight man. Everybody happy new year everybody. We will see you guys on Thursday. We’ll be back with live content. We’re actually taking tomorrow off a tackle training so we don’t have any content tomorrow, but Thursday morning we’re going to be back with the trader’s lounge, the halftime report, the cashflow club in the evening and all of our regularly scheduled programs. So uh, we’ll see you guys on Thursday. Happy new year. We are done