I Just SOLD ALL Of This Stock, Here's Why...

welcome everyone we have an exciting video to get into today the company that i've sold completely out of i've changed my thoughts on this company as new data has come to light and i've sold entirely out of it it's peloton that is the one that i sold out of now peloton is a company that i've been pretty enthusiastic about in fact i made a video on it i think early this year late last year which was why i'm buying peloton and i went over the cult-like following this company had the incredible brand value the organic growth on social media that the high priced low churn subscription income that i love to see in my my holdings i went over all of that all the quality aspects of peloton in that original why i'm buying video now i'm completely sold out of the company and i want to explain how this transition happened because i get a lot of questions where people say joseph you have a lot of videos on why you're buying a stock but what about when to sell when you actually lock in gains on a stock when do you know how to sell a stock and i think this is the perfect example because this is a company that i bought in originally at around 66 dollars a share somewhere around there and i sold it at the very peak i sold a thousand dollars of it nearly doubling my money at like 120. and i want to explain how that happened how i wasn't somebody that bought at the top and sold at the bottom i did that in reverse i bought it at the very low end and i sold it at the very high end of a very long peak so i want to go over why i'm selling this company and why i've completely sold out of it when peloton originally hit its peak i sold i think a thousand dollars of it somewhere around there that was a very profitable trade and then i continued to find i think very material real reasons to continue trimming my position locking in gains and preserving my gains in this stock i sold it time and time again over and over i continued to trim down my position and just today i've completely exited it now in this video we're going to go over what changed with peloton why it went from a company that i was very bullish about i made videos i was excited about it and what's happened over the past year to make me go and this is not in my opinion worth holding anymore we're going to look over all the evidence all the material changes and the reason that my my thoughts on this company have changed so i think this will be a fun video we'll be able to see if you agree or disagree with me selling peloton so let's go ahead and jump right in before we get into specifically peloton i want to do a very short update on the story fund story fund is hovering around a hundred and five thousand dollars seventeen thousand dollars of canes it hasn't made any drastic moves over the past like month it hasn't really moved a whole lot in the past week we're up point four eight percent and then today we're down one point four percent so we're down more today because there's news going on right now the interest rates are going to go up and that will negatively affect these companies am i going to sell out of the best tech companies in the world because the fed might raise interest rates and do tapering in the future no i don't plan on doing that so if you have questions on if i'm a macro trader and i'm going to be putting all of my money into energy stocks and commodities and banks because interest rates go up the answer is no i'm going to continue investing in these companies because i think ultimately in the long run earnings growth is what is what investors care about earnings growth and these companies i think will have amazing earnings growth but as you can see there's no longer any peloton stock in here i removed that one and i increased i believe google a little bit and facebook a little bit those are two companies that i'm betting on even more now if we look at the actual performance of the story fund against the s p 500 this is what the graph looks like we're still a hair above it like 19.95 returns and the s p 500 is at 18.29 but i wouldn't i wouldn't be very surprised if we went below the s p 500 for a while as this fear of interest rate plays out and i'm okay with that if my portfolio trades down and the multiples contract a little bit because interest rates go up that's something that i plan on riding out and continuing to invest and not worrying about it too much the companies that are really hurting my performance right now are alibaba primarily this one has been a huge loss i don't want to dive into that subject now but i'll have another video out this week on alibaba and then we have spotify this one has also been a big loss in terms of it being in the red but i haven't sold a single share of either of these companies and i don't plan to so in my the way that i view it is i really haven't lost anything unless i realize the game by selling out and either of these companies i haven't sold out yet so that is an update on the story fun let's go ahead and jump in to this peloton trade and why i've become bearish on this company now as we go into the bear case for peloton and why i've transformed to becoming bearish from bullish i first want to just revisit the main points of why i was bullish it was primarily because of the cult-like following the massive brand value the huge total addressable market and i think the founder-led team that was running it i think was really good all in all it was one of these companies that was fast growing people loved it it had massive demand and it had that awesome brand value where people wanted to own peloton over any competition here's where things started to unravel first of all peloton has ran into trouble time and time again with the government and regulators peloton recalls treadmill after injuries and child death this is something that in and of itself i didn't think was a huge problem but it turned out to be a bigger deal for peloton part of their growth path outside of bikes was the treads this is their next biggest item this was a massive growth path and this just put a black eye on it having a child death having the constant recalls and then having the design that was particularly dangerous for children where it had a huge exposed belt unlike a lot of other treadmills where it was a little bit the the belt on the back was a little bit less exposed and it didn't have the slates i think that this caused a lot of problems for peloton instead of having a seamless rollout of their new device they were caught doing recalls that cost the company a lot of time and money they had to shut down the sales of their treads and i think this set them back a lot it gave competitors time to pounce on peloton as well so this whole game is about being quick and the government has made peloton less competitive by constantly recalling their treadmills and causing legal issues so a big reason why is the constant issue with the government now the second reason why is the price reduction this was a major red flag for me when i saw this news i was not very happy about it it's true that they'll get more of them sold and they might have more subscription revenue but the price reduction is a huge deal for a premium company like peloton they say that peloton hopes the bike price cut will and the cheaper treadmill will lead to more peloton households the problem with this is one of the main reasons that i highlighted for buying peloton was the massive demand for peloton they couldn't keep up with demand well obviously with the price reduction they're saying yeah we can keep up with demand in fact we're not selling them fast enough so we have to lower the prices that's not good that means that now the the actual productivity of the bike actually producing them outweighs the demand they no longer have the demand to match their production of the bikes and to me that's red flag and not only is the price reduction a big red flag for them not having the same demand that they used to but i also think it's a huge red flag for their brand value again another reason that i highlighted me buying peloton was the cult-like following and the brand value reducing the price reduces the perceived value of the brand the reason that iphones are always more expensive and android users complain why do people pay so much for that cheap you know those cheap junk iphones my android has more ram my android has more storage space but yet people pay more for the iphone that is because apple has enormous brand value that's the reason that nike can charge insane amounts for their shoes they can charge 150 bucks 200 300 for the right jordans they can release them for virtually any price people pay for them that is brand value and these companies know it if they started reducing the jordans to 50 bucks a shoe and 20 bucks a shoe to get them into more households what would that do with the perceived value of the nike jordans it would destroy the perceived brand value and this happens time and time again especially with brands like peloton exercise brands fitness brands clothing brands reducing the price down i think destroys the perceived brand value here's an example of it under armor this is like a case study for reduction in price leading to reduction in perceived brand value under armour once upon a time back in 2013 and 14 was considered the most premium brand in sports apparel it was super highly priced the stock price reflected it it had all that cult following and people had to own it and they'd pay any price for it but then their sales started to slow down a little bit they had the same problem that peloton's facing right now where they're producing enough clothing and they're not getting enough demand for that clothing and so what did they decide to do they decided to lower prices with the lower prices the perceived value of under armour went down the brand value went down and so did the stock price in fact it plummeted you can see how this is played out it had a enormous spike when things were going the absolute best there was peak demand brand value was high as possible and then as happens with a lot of brands it went down in value and this is a problem that i look for in companies that rely off of brands i look for if it can continue to keep that perceived brand value i think that nike will i think that apple will i'm not so sure about other companies this is why i don't have investments in lulu or all these different companies is because i need to know that they're going to keep that perceived brand value with what peloton has done lowering their prices i become very concerned that they're going to be considered the premium go-to have to have brand in this industry and this is a very big concern the lowering of prices is a massive red flag to me now other investors are taking notice of this well this is why the stock price has continued to trail down the wall street journal just came out with an article a couple days ago i came across it today and it also summarized my thoughts here peloton sold a dream but investors are waking up once aspirational peloton is becoming a commodity and investors are taking notice how does a company like peloton become a commodity not something unique and not something that's monopolistic but rather something that everybody else has that's because of fierce competition and peloton is filling the heat of fierce competition in this article they say peloton is a different company than the one investors bought two years ago in its public offering and not necessarily a better one myriad at-home exercise brands have emerged over the years but it came out of the gate selling something special an aspirational piece of hardware that doubled its window art this was a true statement having it be window art is accurate people had peltons in their living room right next to their pianos it was like a work of art they would boast about it on social media again it had that cult following it had that status symbol effect to it but the article goes on to explain that the core buyers of the bike the ones that were affluent that wanted to have this you know this high end piece of device in their home have already mostly purchased them and now they're facing a lot of competition they say a myriad of at-home exercise brands and we can see that happening for instance when i go to costco i see these echelons everywhere and costco doesn't hold products for very long that don't sell the fact that costco continues to hold echelons means that they're selling them they would not restock them if they weren't selling them so echelon is saturating this market of connected fitness devices and people are choosing it over pelotons i think that this is taking away from the total addressable market so now the total addressable market argument i don't think is as compelling peloton's only going to take a small portion of the total exercise market we have other brands taking market share because now brand value doesn't matter as much peloton's core offering is being commoditized it's being offered by a variety of different companies we can also look at of course nordictrack they have their commercial connected fitness solution they're a huge seller they continue to sell these and then we have the echelon bike with a bunch of different products as well marrying peloton's exact strategy but doing it at a cheaper price point so these aren't immaterial issues i think these are real issues that have caused me to become more bearish on this company the constant struggles with the sec essentially saying that their treadmills are dangerous for children that's not good branding for the sec and i think that will make people rethink buying the peloton tread they have issues with demand lowering prices across the board is the result of having a lack of demand for your product there's no reason that peloton would continue to lower prices if they had enormous demand like they did last year and with the lowering prices we have issues with perceived brand value the one thing the main thing that peloton has going for it is its enormous brand value and cult-like following without that the company becomes commoditized where lots of other companies are selling the same thing the one differentiating thing about peloton was the brand value and they're destroying that by lowering their prices and then of course the last thing that i'll highlight on my decision to sell peloton is the company was also trading at a premium it was trading as though everything needed to execute perfectly and we know that that's not happening and i fear that there could be a reversion to the mean that's why i'm locking in the gains that i have and i'm putting that money into companies that i think have a better risk adjusted return specifically the sale of peloton went into facebook i think this company has a better risk adjusted return so that's it that's the reasons that i've completely sold out of peloton i've locked in a nice profit i've made some gains and i'm putting the proceeds from the sale into facebook which i think has better risk adjusted returns i'd be interested to know if you agree or disagree if you disagree and you think i'm making a mistake let me know in the comments i'll read every single comment and i'll take your feedback because i'm interested to know what you think so let me know other than that i'll have another video out this week so make sure you subscribe to the channel if you want to follow along with the progress of the story fund and the updates with the s p 500 and everything i'm doing other than that i'll see in the next one

Channel: Joseph Carlson After Hours

Views: 29,742

Rating: 4.844275 out of 5

Keywords: The Joseph Carlson Show, investing, stocks, stock market, dividends, portfolio update, m1 finance

Id: FNvdHRvH5AI

Length: 14min 54sec (894 seconds)

Published: Mon Sep 27 2021