Catherine Wood: Tesla Leads These Tech Stocks Surging Higher As Innovations Accelerate

Hello everybody and welcome to Investing with IBD sponsored by MarketSmith today is August 19 2020. i'm your host Irusha Peiris and today we have Cathie Wood on the show Cathie is the founder CEO and CIO of Ark Invest Management thanks for being here Cathie thank you Irusha i'm very happy to be here on today's podcast we're going to talk about the current markets disruptive trends and then we will end the episode with a few current ideas so let's get into the current market the market continues to be in a strong uptrend we have three distribution days on the nasdaq and S&P 500 Cathie what are your thoughts on this market and also just 2020. oh well 2020 has been pretty wild of course um during the coronavirus uh i started doing youtube videos on fridays just each each week to hold our clients and prospective clients anyone's hands i mean we did have a point of view and that point of view was that we were setting up for a very powerful v-shaped recovery and i i think a lot of people found it very difficult to understand that at the time um but now we're seeing it what we've seen is consumers coming back very strongly businesses scrambling to catch up to them inventories are falling uh they can't keep them on the shelves this is the definition of a v-shape recovery the other thing that we wanted to emphasize for our clients was that during difficult times uh that innovation usually takes off and the reason it does is because it solves problems think of all the problems that the this pandemic has created right um we're working uh digitally now of course and uh education is online uh cash we're not passing cash anymore so you know again uh innovation solves problems and i think the big surprise to us has been to hear companies say that they didn't expect to see some of the customers they're seeing now for five years we actually have had uh companies say that and some of them have withdrawn guidance not because they don't know how low uh their business is going to go but they don't know how long this is going to last has have we just pulled forward activity or have we accelerated change that was underway and and was going to take place and and extend over many many years well how long do you think these changes do you think these are permanent changes with the work from home and and things like that people ordering a lot more on online uh do you think that now we've finally had that kind of ship that we've all kind of been expecting yeah i think well i think it's happening faster now because of the the coronavirus i think it would have happened much more slowly over time i mean think about how uh we viewed working remotely before right we had to do it you know there was some question uh you know is this person really working or that was the prevailing wisdom right i think most of us are understanding now that we are more productive we have become more productive certainly at arc invest we've become more productive but we're seeing that uh from our clients from our companies uh i think we've stepped up in productivity i think the the gdp accounts uh productivity was up something like seven percent at an annualized rate these are crazy figures normally productivity grows in if if we're lucky it's growing and it grows in the one to two percent range we're now in the high single digits and i think it's going to continue for a while yeah i mean we've definitely seen that at Investors Businesses Daily too uh we're all working from home we're a lot more productive and in many ways it's kind of hard to argue going back to kind of the normal full five day week period no i agree i agree i mean and and now we're i think in a healthy way uh trying to figure out the the differentiation between work and the rest of our lives i i think there are some healthy uh there i think people are getting more into exercise i'm seeing a lot of that in our own firm so uh you know there are some very positive uh uh results coming out of this however devastating some of the results have been yeah and now now one of the latest news items over the last couple of weeks uh that's been kind of just all over the financial news is uh the news going on with Tik Tok and president trump uh trying warning that he might ban it and maybe microsoft is going to acquire it uh what what are your thoughts on Tik Tok and also uh wechat by Tencent yeah it's been interesting to watch that of course um Tik Tok i put it i put the app on my phone about three months ago so now i guess the chinese government knows everything about me but but guess what i i already thought that the chinese government knew everything about me because i've traveled there so much yeah so it's no surprise to me we've talked to some cyber security experts we have a business brainstorm uh not a business a research brainstorm on fridays uh and uh some cyber security experts do not believe that tick tock is a security risk per se a privacy risk sure um so i found that to be interesting they would they they think that you know 5g and some of what huawei had been doing was much more of a risk okay um i wonder if uh if somehow there was there were some conversations going on uh before uh the trump administration came out with the news because uh the head of streaming at disney left to run streaming at Tik Tok globally uh so that's a u.s executive it could be i have also been surprised there hasn't been more of a retaliation so again i wonder how much back and forth there has been uh that we don't know about it's been interesting to watch facebook with its reels some people think that is just as addictive as Tik Tok and maybe one of the reasons is it includes a lot of Tik Tok videos so uh i you know it's kind of hard to figure that out i think what uh we've also focused on is um because china is becoming so politically sensitive when it comes to these kinds of services we're watching a company called sea uh the the Sea Limited i mean s-e-a yes and the ticker is SE singapore based and actually 35% owned by Tencent uh and it is in a surreptitious kind of way making its way around southeast asia and into latin america and growing just incredibly fast so i think Tencent is now you know basically uh enabling uh some of these other companies by giving them lots of helpful hints and probably a lot of uh support so uh we're we're watching that dynamic as well yeah well talking about Tencent i mean it seems like Tencent invest in like every new company in in asia they really place their bets in a lot of where you would think that they might be competitors yeah they're they're partnering up and i've always thought that was an interesting strategy yeah we a tallied actually we talked about it this morning at our morning meeting we've we tallied the top 100 companies uh in which Tencent is invested and i think that right there is 200 billion dollars uh right right worth so it's very interesting Tencent had a very open mind this way and um you know they want to participate no matter where and and and no matter how so kathy let's get let's go back and and and you know just walk us through how you got started in investing and and how you got into this business oh okay yes i was at uh usc uh that's the university of southern california and um i have to say that because i just bought a place in south carolina and there's a usc there too oh i know yeah now they're very sensitive with that which i don't blame them but no i agree but as you can see in the background there i have a usc helmet i i went to usc business school there at marshall yes or a fight on yeah so uh i met professor art laffer there art laffer laffer curve supply side economics yeah wow he was teaching in the graduate school i was an undergrad but i befriended one of his assistants and all of us were taking night classes and he was giving a night class and um he suggested that i uh become that i joined his program and and he let me apply or the school let me apply his courses and and and and the program that he and his proteges brought with them from the university of chicago to uh my undergraduate degree so my love of economics started there but really what that was was a love of trying to figure out the way the world worked and the way the world was going to work so really trying to understand the future art introduced me to capital group on the west coast so you know and i didn't even know i was a junior in college this was 1977 um and i i didn't even know about this business you know i was a junior in college and the investment world was out of favor then we had been in an inflationary period and bonds were out of favor equities were out of favor no one wanted to work for an investment firm they're all going to consulting firms and that's where i learned hey when everybody does this and you do that maybe there's a great that's a good idea um so i started there but they were trying to figure out what was going to happen to hong kong in 1997 so it was 1977 20 years and i said i want to be in this business and then when i moved to jennison associates here in new york three years later um i had the privilege of being able to move into equity research and portfolio management but in order to earn my stripes i had to figure out my own universe and as the CIO still there uh said you know our analysts are lifers and so you're just gonna have to figure out your own universe something that's not already being followed well what was that these were companies that were IPO'ing that kind of fell through the cracks uh the reuter reuters what was that well it was called a database publishing company at the time where do we follow that well it's not a database company so the tech guys didn't want it it wasn't a publishing company so the publishing guys didn't want it yeah and and so i put my hand up and of course that was the very early stages of what would become the internet right that's incredible isn't it isn't it yeah i mean all these great new companies fell to you they've yeah yeah and a lot of times i i almost feel like in equity research or even just economics everyone has a tendency to stick with the companies that are doing well right now it is kind of interesting that you with an economics degree you were attracted to disruptors and a lot of these newer companies yes yes and i think the other reason was i learned an important lesson in economics when i started in the business when i moved over to jenison in economics uh uh inflation and interest rates were well into the double digits and with the guidance of Art Laffer and watching Paul Volcker i we we made the call that hey inflation and interest rates are going to peak and they're going to come down and multiples will expand well no one was thinking about that i mean Henry Wojciner these pro i mean Henry Kaufman Al Woods Lauer Gary Wayne Glowski Milton Friedman himself none of them thought that that was true they all thought inflation and interest rates were embedded in the system at a double-digit rate so again here's another example everyone was moving that way and we basically at Jenison said no we think this and it was a wonderful time to start investing incredible uh so so after that you went on to to co-found a hedge fund too right yes after 18 years at uh Jenison uh tupelo capital uh one of my Lulu Wong one of my uh colleagues at Jenison and i moved on uh to manage her family's um fortune or at least a part of it and uh and the reason we wanted to do this is it uh it was opening us up to the the world uh it was a hedge fund uh we had a lot of agility and there was it was it was the beginning of the well it was in the middle of the internet bubble and we saw all of these opportunities so it was a great time to start a hedge fund because you know after a while you realized okay now they're counting eyeballs to value these companies this is not going to end well and so you know we did we did very well and it was an exciting time to to learn uh how to run a hedge fund and to be global as well very exciting and then and then after that you went to lions bernstein right yes they were looking so uh lulu and her family decided to remain uh a family office instead of building out which was our original plan so yes i joined Alliance Bernstein and i became a chief investment officer of global thematic investing and uh it was during the tech and telecom bust and so ironically you know our portfolios down to i remember 11 tech when the indexes were 30 35 to 40 percent and honestly i think most most people thought it was political suicide to do that um and and it and and it and the reason i did it was i'd never at Jenison or at Tupelo paid attention to the benchmarks but we had moved into a world where benchmark style investing and benchmarks themselves were becoming very important sort of a centerpiece of sort of certainly quantitative research so maybe ignorance was bliss but it really helped me not to care that the tech the tech was 35 to 40 of these indices and to make that move uh because it did pay off and so what inspired you to to leave Alliance Bernstein and start uh Ark Invest well so the move towards benchmark style investing and and and passive generally in the business not not alliance bernstein that gained some momentum after the tekken telecom bust or during it but uh after 0-809 it became embedded i think in most traditional asset managers so we were already a bit of an odd duck yeah different duck and after 0-809 i think i i think there was a feeling that uh you know this the strategy we were uh uh involved with was very volatile and um and i think they would have liked to have risk completed our portfolios but that that is something that wouldn't have been appropriate for what we do uh the other thing that i wanted to do that i could not do it Alliance Bernstein or nor could we do it at any traditional investment firm this is nothing uh this is not saying anything about alliance merchant i wanted to open up our research and share it with the world i wanted to develop the equivalent of an open source research equity ecosystem patterned after open source software and yeah and it and and this was an idea that came to me in august of 2012 why don't you disrupt the financial services industry or at least the asset management part of it with some of the technologies that have disrupted other industries social media and being a very important part of that but just opening up generally because i wanted our analysts to engage with the innovators and and these innovators are on social media i never dreamed in 2012 that twitter would be the social network that um that was the best suited for this back then it was tweens teen celebrities and i thought it would be linkedin or you know something else but twitter was it and has been really important to us we are now i believe a part of the communities we are researching in a much more profound way than most analysts and portfolio managers can be and that's because we're willing to share our research well at a traditional asset management firm a compliance department is not going to turn itself upside down for one portfolio team among dozens especially because most of them most of those inside uh compliance do not use social media and you know don't and and are more fearful of the ex of how much how vulnerable it might make uh the organization well that that makes a lot of sense i've enjoyed a lot of the research over the years that that your team has shared and uh it's right up our alley here at investment investors business daily uh with a lot of the stocks that we find coming up on our radar so let's take a quick break here uh the market continues to be in an uptrend and leading stocks are acting well when we return we are going to talk about some of the disruptive trends that are changing the world today we'll be back i am here with Scott St Clair Scott's one of our senior product coaches at MarketSmith now scott there are a ton of publicly traded stocks just on the u.s i think it's over 5 000 stocks who has the time to go through all these stocks and find the very best ones yeah most people don't right so what you need is a tool like market smith we have decades of research on what makes a great winning stock so we've done all the research for you so we're going to try to highlight those specific stocks with those great data points so if you're looking for that next great potential big winner orange stock ideas button you just click on it and you've got some of the main reports that we use including the growth 250. yeah and the growth 250 is the first list that i go through on the weekends yeah it's the most popular one but there are others there's a breaking out today stocks near a pivot and then the blue dot list right which is very popular it's going to show you the stocks with the best relative strength so we've done a lot of the work for you what you have to do is review these lists you're going to come up with some of the best ideas in that current market environment perfect MarketSmith saves you time and makes investment research that much easier for more information go to investors.com/podcast2020. Cathie Wood is our guest on Investing with IBD sponsored by MarketSmith okay Cathie let's get into some of the disruptive trends and let's start out with the genomic revolution because this one we know it's out there it's starting to happen but it's kind of hard for i think a lot of us to really grasp how revolutionary this is yeah well i think one of the reasons it's hard to grasp is is what we discussed earlier the cracks that this is falling through technology is going to impact health care more profoundly i think than anyone now understands there is a convergence among dna sequencing artificial intelligence and CRISPR gene editing which is going to lead to cures for disease now it's very interesting to hear our genomics analysts talk about this it's almost burying it as i as a portfolio manager have to say they'll say something like curative therapies i said you mean cures and you know and i i still think that i i think people don't believe that because it really hasn't happened before right yeah yeah and let's start with the CRSPR gene editing because this is i remember when i learned about this a little while ago it was mind-boggling yeah that they could do this and uh so walk us through this technology and how it could lead to a lot of cures let me back up and start with dna sequencing and and now we're able to find the needle in the haystack right so uh you know we have three billion base pairs of dna that's a lot of hay right and to find one mutation was impossible before just impossible yeah if it was possible it was way too expensive so the tekken telecom bubble was beautiful because it planted the seeds for everything that's happening now but it was way too expensive back then that's why that's one of the reasons we took technology down to 10 of the portfolio back then it cost 2.7 billion dollars to sequence the first whole human genome even if costs had come down by 75 the next year we weren't ready for prime time now we're down to uh what by some measures some private companies can do it for 500 to sequence your genomic profile 2.7 billion in 2003 to 500 that's veritas it's george church's company um and uh envite is the molecular diagnostic company that is driving down the cost curve from a testing point of view and really going to revolutionize testing as well so now because we can sequence a person's genome for that low amount of money we're going to be able to identify mutations from one sequence to the next so uh many people think oh you'll just be sequenced once in your life when you're born and that's your dna no there are mutations all the time and they can be caused by heredity they can be caused by stress environment poor diet all kinds of things right right so we are all going to have geneticists and we are going to find out from our geneticists uh from one year to the next or every two years what mutations have mutated that's like finding the needle in that haystack right why do we want to know that because a mutation is a programming error something's gone haywire and it is the earliest manifestation of disease okay so we've got what now the reason we're able to to find this is artificial intelligence artificial sequencing and artificial intelligence are helping us understand the pathways for disease CRSPR gene editing once we figured out the mutation is able to reprogram the the error and really reverse the disease artificial intelligence uh might be able to help us understand uh when we're heading for stage one cancer right so we artificial intelligence might help us understand that but let's say we when we don't get it it isn't that good for a number of years if we do get stage one cancer we believe that CRSPR gene editing is evolving fast enough now that we will be able to reprogram that error now we're already seeing CRSPR cure humans of sickle cell disease and beta thalassemia CRSPR therapeutics is the company involved here in those two human trials and the trials no news is good news we would find out there are so many trials going on right now we would find out if it was not working of that i'm convinced they'd have to stop and something really bad happened no news is good news we just had a webinar with Jennifer Doudna who's the co-inventor of CRSPR gene editing and i said that to her i said is no news good news and she didn't she she just smiled it was clear it was clear no news is good news but the news we're getting is it's almost rogue these are patients who are coming who are in trials and saying i'm still in the trial i'm cured victoria gray was one woman sickle cell disease she used to have to go to the emergency room six or seven times a year um and the life expectancy of someone with sickle cell disease is in the 50s she has not had to go to the hospital in a year and she's still on the trial beta thalassemia a man in uh in a crispr trial used to have 17 blood transfusions a year and has not had one in one year again no news is good news yeah so those two have been announced and we're going to see a lot more milestones this year so CRSPR their therapeutics and the ticker symbol for them is crsp so they're a major player in this but now they're there there's another company that's uh kind of battling out uh for i guess with the patents for the CRSPR technology uh eat us medicine right ticker symbol EDIT E-D-I-T yes why CRISPR over uh well we own CRISPR Therapeutics Editas and Intellia those are the three companies with the foundational patents so Intellias NTLA those are the three companies with the foundational patents for CRSPR gene editing this is for cas9 which is a particular enzyme and and seems to be the one uh that is finding most success right now jennifer doudna confirmed that wow now why are we invested in the three of them well uh we've learned from the technology world not the healthcare world but that technology world that when um when when there are advances like this for the welfare of humankind however you want to say it um and for the good of all the companies involved cross-licensing will probably uh take place at the end of the day now we think that CRSPR and Intellia are in stronger positions than Editas for CRSPR cast nine but but i mean yeah for CRSPR cas9 EditAs however has another flavor of uh of CRSPR uh that we think could be important in terms of pediatric blindness uh so again it may be in the weaker position it'll be able to cross license plus it has uh another flavor of CRSPR which could become very important very cool now you you built a whole etf around this you know so so people don't necessarily have to worry about CRSPR or Editas or some of these other companies and so you an etf just just based on genomics right yes the genomics revolution is what we call it and uh i think again this convergence of artificial intelligence so we own some tech companies in here um and not too many i mean it is predominantly genomics companies but um the the the convergence of artificial intelligence uh dna sequencing and uh CRSPR gene editing is going to power other companies as well uh testing companies i mentioned in vitae you know in in the world of artificial intelligence the companies with the most data and the highest quality data are are probably going to take the lion's share of the market and we think Invitae could be that company in the molecular diagnostic space um especially now that they just brought uh bought arch a liquid biopsy uh company now why do we say that uh well their tests are because of the amount of data they have collected and and their willingness to go down the cost curve of dna sequencing and price tests uh as low as they possibly can so that they can uh so that they can analyze all of these patients they will then have access to data anonymized of course that that no one else will have and they'll have more of it the other thing they have that no one has right now is a network of geneticists globally not all of them work for Invitae but they're part of a network and these geneticists are critical to helping doctors understand what the results of these dna sequencing exams are so so there's an important network evolving here which again reinforces uh the desire of people to go to a company like Invitae they have the expertise to uh translate and decipher uh what all these tests mean yeah i mean and if you take a step back and you mention a number of tech companies you know the tech companies that really did well were the ones that could create this database or create this kind of go-to place like a google or an amazon uh and so it's really interesting that Invitae here is building this this database or something where all the medical professionals have to go to get all this information and also obviously a very very low cost for the tests yeah they started in the hereditary world but they have now moved into non-hereditary which is called somatic so it's going to be much bigger and i think uh here's another reason it's misperceived or it has been misperceived lab companies like lab corp and quest diagnostics they have been commoditized and from a technology point of view they are not very interesting companies from our point of view they may be very interesting to value investors but they're not to us nonetheless they are perceived testing companies are perceived as low margin and commoditized that's why this is is going to be such a surprise it is keeping its gross margins down to 50 and that's because it wants to keep cutting prices so that uh more and more doctors and payers will be attracted to its tests so it's being very wise that way yeah and they're using the exact same strategy but that all the tech companies did 20 years ago which is really interesting healthcare companies have not done that they have believed in keeping prices as high as possible for as long as possible myriad genetics case in point and that's why they're losing so let's uh talk about obviously a very a very big topic for all of us COVID-19. what are some of the companies that are are uh really involved in helping defeat this and and i'll just bring one up now because i'm a fan of this company Illumina how are they playing a role uh in this with the sequencing yeah so the the covid-19 coronavirus uh was sequenced in two days in china with aluminum machines back in 2003 remember when i said the technology wasn't there and the cost wasn't there it took five months to sequence that virus and think about that if you if you don't have the sequence if you don't understand the virus you can't have a test we wouldn't have had any tests uh if if we had had to wait for five months of course instead two days and then another company Twist Biosciences um was critical here so Illumina read the genome uh twist was able to write it and send the instructions to Abbott and Cepheid Cepheid's owned by Danaher and they were able to then produce tests so the turnaround time for sequencing was two days the turnaround time so that's reading the sequence the turnaround time for writing the sequence was two weeks record time that was Twist and uh the testing companies then were within a month we started to have uh tests um and i know there were some mistakes in the cdc uh not allowing uh universities and so forth to participate so that was a political mistake but the science of scientific um breakthroughs were there two days two weeks uh a month one to two months um and then on the vaccine side we have and Moderna gets a lot of the publicity mrna um and uh as it should it's it's working at break neck speed um it is a an MRNA vaccine company we've never had an MRNA vaccine before i um and no no in inovio ino is a dna vaccine company we've never done that before and Arcturus ARCT is also an mrna uh vaccine company but it is a self replicating mrna that is that that that's its differentiation it does not get much press um and i i have to tell you it is one of our top positions in um in the genomic portfolio not because we put it in there as a top position it was too small a cap it earned its way there because it struck a deal with duke university and uh singapore i think the singapore uh it's one of the medical institutes in singapore and we believe that very soon after moderna uh has a vaccine if not before we're not sure about that Arcturus will have one and the difference will be it will be a single dose so you won't need a booster shot uh and so far uh we know israel is already working with arcturus and has already ordered it it'll be about 70 dollars per vaccine Moderna's will be 60 dollars for the vaccine and a booster so we think the compliance uh just one vaccine uh will win a lot of uh business over two Arcturus although there will be lots of room for both of them oh that's perfect i mean that's it's incredible because how many things how many variables are going on and all these all this innovation is really helping out yeah i think uh just one more note on vaccines the the the budgets for vaccines dried up after sars in o3 because sars made two it was a coronavirus it had made two rounds and then it just went poof so there was a mad rush rush into vaccines then yeah it went poof there was no need for them and really funding uh dried up and and and we've had to rev it back up again so understanding disruptive trends will help you develop more conviction in your stock so you got a great example here of just one huge trend so coming up next we are going to talk more about trends and we will also talk more about stocks so stay tuned MarketSmith will give you a huge edge in the stock market better stocks bigger profits MarketSmith is the top research platform for ibd it's just the best tool for individual stock selection everything within market smith is designed to bring those best stocks to the surface it does a lot of the work for you of filtering down to the potential leaders it's when you take the training wheels off and you're ready to invest on a more professional level MarketSmith will help you take control of your investment life if you want to get serious about investing start your membership today we are back with Cathie wood on Investing with IBD sponsored by MarketSmith okay Cathie let's go into a few ideas here now the first one is is probably the the most debated stock on the market it is tesla and obviously you're a big fan of tesla why do you continue to like this idea uh we still think it's way underestimated even with the massive move it has had it hit uh 350 at the bottom in march um and is now 1900 roughly there yeah it went over 1900 and fell back a little bit today yes uh and uh even with this um our bear case for this stock has been 1500 now that's a five-year price target that assumed that tesla would lose market share we first made this analysis in 2018 2018 tesla had a 17 share of the global ev market including china last year i think i've got this number right they had 23 percent share we assumed for our bare case that tesla would lose market share from that seventeen percent and go down to in our base case eleven percent and in our bear case six percent instead what has happened it went up to twenty three percent last year and now i think we're up to this is rough uh as of mid-year uh uh about 26 so it's still increasing has 78 nine to eighty percent share in the united states and even in china where i think there are 150 electric vehicle manufacturers crazy crazy um tesla has 21 had in june 21 of that market think about that 150 and tesla is 21 now it's incredible yeah it is incredible what's really interesting is Pinduoduo which is a social commerce company yeah it uh basically is giving away a tesla or there's some or selling a tesla selling selling tesla on its network for a discount and tesla has had uh uh has had to go to them and say wait a minute the customer is ours not yours so they but think about that Pinduoduo thinks this is so important in china is going to be such a business getter yeah a driver for it that it so uh that's that's the first thing so it's not losing share it's gaining share and in that bear case we have nothing for autonomous at all and nothing for ride hailing ride hailing we do think they're going to start a ride-hailing service this year they're going to compete against uber and lyft uh we believe if they do that and again we think they will uh we think that the bear case is history um and so when we see it past uh uh 1500 to 1900 um we're not worried at all and in fact our base case which is in the 7000 range this is again a five-year target our base case will also go up if they do launch this ride-hailing network because we have not included uh that and in our base case we have simply assumed that they keep their share from last year not lose it uh so i i believe i'm right we may have so we may be assuming that it does go back to 17 i'll have to check on that but but nonetheless so we're at 1900 now 7 000 before ride hailing it will go up with ride hailing our minimum hurdle rate of return for any stock in our portfolio is 15 at a compound annual rate over the next five years that means a doubling over five years so at 7 000 plus versus 1900 now we're still well above that it's still one of the most uh we believe it will drive more performance than most stocks in our portfolio even today now with the legislation or uh within california and obviously uber's been affected with it having to have full-time employees would a tesla be affected by that would their ride hail network be affected by that or it's just these are tesla drivers and and they're just taking advantage of their tesla car and connecting with other drivers and driving to from one location the other well even uh well tesla could actually hire these people make them full-time employees because uh the the total cost of ownership for a a model 3 today is about 30 percent less than a toyota camry mostly because of the residual value in fact i've seen uh some model s's uh selling for 90 percent of what people bought them for and we think the model threes will be even better if those become the ride hailing network cars so what's going to happen tesla will say to a person join us and for five thousand dollars down or seven thousand dollars buy a well we'll let you buy a model 3 you can work the rest of the price off and oh by the way it's going to be cheaper for you than a toyota camry so they will do that and then what does that do if they if they drive uh for 50 or 60 of the day compared to the five percent of the day that i drive and less than that now that we're that i'm not driving to the train station yeah um they're going to be delivering real miles data real miles traveled to tesla to feed its autonomous network so we think they have somewhere between 14 and 15 billion miles worth of data the just like what i mentioned with the genomics based data in vitae same is true in the autonomous taxi network the winner is going to be that company with the most data and the highest quality data and the best ai deep learning neural network expertise and they're doing some very interesting things with video labeling in the ai uh area which we think has them miles i mean there's just no one's even close no one google's not close cruise automation's not close no one's close and even in china baidu was supposed to be the autonomous taxi platform yeah you know it's interesting uh we we just learned that uh Nvidia is no longer included as a part of that platform it's now Xilinx which is an FPGA that is FPGA's are not going to be driving autonomous taxi networks or platforms so we think even in china tesla might have more of a shot at the autonomous opportunity than we expected we expect them maybe to get 10 percent of that market we do think each market's going to be a natural geographic monopoly we think tesla will get the bulk of the u.s market we didn't think that about china and we still don't think that about china but baidu is suggesting to us or the moves they've made recently that hmm maybe even tesla has a shot there now one of the criticisms of the tesla and the self-driving cars or that that initiative is they've they've kind of got taken a different route they've maybe tried to be a little bit cheaper on on some of things or doesn't analyze as well because i i guess what a few years ago with Mobileye they kind of had a falling out with them and so they're gonna do it themselves so do you see any concerns uh with that or you still think that you know these guys are definitely gonna be the the first ones are most likely gonna be the first ones to really get to that stage five i guess with self-driving yes i i i do believe actually uh elon is saying that he's been um driving to and from work pretty much without uh in the prototype of their full self-driving car pretty much without uh having to intervene um so i i think they're what i love about elon musk is he's he he's the guinea pig he's willing right right and and and i believe him when when he says that so they are they probably because of the billions of miles of data they have seen more corner cases uh then i think most auto manufacturers and technology companies will see in the next five years so it's going to be very tough for anyone to catch up to them so now i i find it interesting maybe six months ago or a year ago when they announced that they're going to get more into the insurance business too how do you think that's going to affect their their model yeah i think this will help them in on the ride hailing uh side of things i remember uh talking to uber drivers and the insurance costs were killing them i i mean i really felt terrible for them they were getting that you know that the hikes they were seeing were enormous um so tesla knows more about how its cars are going to perform with autopilot uh than any insurance company will so tesla will self-insure we're we're pretty sure of that and so the insurance costs are going to come down uh dramatically you know when the when NITSA did the uh analysis on the first fatal crash um the model s fatal in florida um when it took them six months to do that study but after they finished and remember this was about three years ago yeah even nitsa stated in its report i may not have this exactly right the wording but they said that anyone driving a tesla car with autopilot was going to uh experience 40 was going to be 40 safer now was it 40 fewer accidents or fatal accidents i don't remember but 40 safer any insurance company knowing that would price accordingly they're not willing to do that right now the insurance companies are a little bit uh behind the times they don't understand this autonomous concept tesla does so it can insure perfect let's go very quickly to one more stock here uh let's go to square and and what what do you like about this company right now uh square is uh becoming the first uh branch bank in our pockets or pocket books it is going to disintermediate the banking system uh its cost of customer acquisition is twenty dollars why why is it whereas a bank trying to get a credit card come from a customer we know this from all of the solicitations we get right right so credit cards or or checking accounts savings accounts they're willing to pay uh anywhere from 350 dollars to 1500 per customer why think about your own behavior my behavior i have been at the same bank for 20 to 25 years i have it's a pain to change and you know habit uh now we are seeing the disrupter coming in from they started with the unbanked and the underbanked and that's where they dominated for a while especially in the south and southwest now we're seeing the demographics pick up the reason their cost of customer acquisition is so low is they've got a viral network my children are very happy to have me on uh the cash app right they they're very happy to but what about venmo versus the cash app well venmo yes and cash up is out marketing venmo right now they're both growing very rapidly but cash app is out marketing venmo um uh you know uh with uh cash app uh what are they what they're called cash app fridays and the different prizes they give like bitcoin and so forth and um and and co-marketing with Fortnite and uh Travis Scott and all of that so they're doing some unbelievable things that way they also have the other side of the ledger they started with small businesses and merchants and what they've been able to do is because they know the merchants swipe the credit cards through the square right their square sale um square knows every minute of the day every second of the day how these businesses are doing and so it's going to them and saying hey you're doing really well would you like a working capital loan hey you're doing really well would you like uh to buy another piece of equipment a bank has no idea how these companies are doing they get for every piece of data that a square has on a company i mean for every i should say 10 000 pieces of data or bits of data uh a bank might have one uh so and and it'll be lagged by weeks or months so we're talking about truly disruptive innovation that we believe is going to transform banking transform financial they're offering um securities equities so trading now through the cash app just like robinhood is uh they're going to offer insurance so watch out financial services you are about to be hollowed out so i often say this to our clients prospective clients i say you know we're a great hedge against those passive indexes you're in right now especially with those robo advisors wealthfront and and others um well uh i i would also be careful because the transformation that these five innovation platforms that we're focused on dna sequencing robotics energy storage artificial intelligence blockchain technology those five innovation platforms which are involving 14 technologies are going to disrupt every sector so you may think you have a cheap looking portfolio an inexpensive a good value but it might be a value for a good value for a reason it's being disintermediated it's a value trap so be careful that's perfect well Cathie i know you have to to run so thanks so much for joining us today oh thank you my pleasure Irusha it's been my pleasure so next week we are going to have Jay Jacobs of Global XVTS on the show Jay is a senior VP and head of research and strategy at GlobalX so that's it for this week on Investing with IBD i'm Irusha Peiris and thanks for listening

Channel: Investor's Business Daily

Views: 139,705

Keywords: investor's business daily, Tesla, Square, Tik Tok, Investing, Market

Id: yr41UKwpH1o

Length: 56min 7sec (3367 seconds)

Published: Thu Aug 20 2020