Yahoo Finance’s Zack Guzman and Akiko Fujita brings March Madness to the stock market with Ross Gerber, Gerber Kawasaki Wealth & Investment Management CEO & President and Ryan Payne, Payne Capital Management President.
ZACK GUZMAN: First, the other thing that we’ve been watching, if you’re a sports fan out there, is that the Final Four match-ups are finally set for this weekend featuring a surprise team in UCLA, the first team since VCU in 2011 to advance from the first four match-ups all the way to the Final Four, and that’s cool and all, but we talk stocks here on Yahoo Finance and make money. So that’s why we’ve been waiting for the culmination of the championships in our Final Four. The stocks left in Yahoo Finance’s stock madness and the coaches, if you will, that brought them to the big dance are back with us today– two money managers you know and love.
We got Ryan Payne, Payne Capital Management President, and Ross Gerber, Gerber Kawasaki Wealth & Investment Management CEO, who battled all the way to the Final Four with me and Akiko here. And guys, it’s taken weeks, but here we are, down to Tesla, Disney in the East, and we got a cannabis company Trulieve and Cisco in the West, and I think we should start over there on the West side of the bracket. And earlier this week, we had Dan Niles also saying Cisco is a top pick. But Ryan, I guess we’ll start with you here in the Final Four match-ups, pitch me on why Cisco should be our Cinderella again.
RYAN PAYNE: I mean, obviously Dan Niles heard my pitch last time was so compelled by my brilliant insight, so you’re welcome. And I think you just come back to again, you know, look, we’re going to go back to work, we’re going to go back to the office, and you’re going to see a lot of CapEx back on, you know, corporate spending on things like boring things like switches, and a lot of the software needs to be upgraded, and switches need to be upgraded. So Cisco’s perfectly positioned for this. It’s the only tech stock I can find that has a reasonable valuation at 16 times forward earnings. You’re getting almost a 3% dividend.
I know for Ross, this stuff is very foreign. He likes to pick stocks that have no earnings or, you know, basically have hundreds of years of profits priced in. So I think, you know, the market’s going to come back to reality, and investors are going to be looking for profits– you hear that word profits, Ross, I know it’s not familiar to you– as the economy reopens, and that’s where the focus is going to be, and that’s why Cisco here is obviously the winner of this tournament.
ZACK GUZMAN: I mean, Ross, you’re just going to, you got to come back and battle here.
ROSS GERBER: I’m sorry, I fell asleep for a minute there. He was talking about Cisco–
And the last time I think Cisco was exciting, I was 28. So the moral of the story is actually, we’re talking about Trulieve, right? So you know, this is a very profitable company. And I think just today, they legalized cannabis in New York. So when you look at Schumer on the floor of the Senate talking about legalization, and you see the enormous margins and profits that are made in cannabis, I mean, it’s like not even comparable.
Like Trulieve is one of the best companies in the stock market for cannabis, and Cisco is one of the oldest, most unimpressive companies over the last 25 years. Now, to Cisco’s credit, it’s always had a 16 PE. It always will have a 16 PE. Maybe they get earnings going higher, but the bottom line is it’s not going to grow 100 or 150% like Trulieve.
RYAN PAYNE: Well, it’s already up 400%, Ross, and you know, I don’t know, I don’t think the market knows that we’re going to legalization in other states. That’s probably not priced in, you’re right. That’s probably eluded everybody. So–
ROSS GERBER: It’s all about the future. It’s about the future, Ryan, and the future is cannabis.
ZACK GUZMAN: I sense some sarcasm on the part of Ryan Payne there. That is one of the things that we have been talking about though. In the year to date run ups, right, Trulieve up about 35%, Cisco up about 17%. We’re not necessarily using that as a scorecard in picking a winner in these match-ups. And you guys have put me in a tough spot of maybe here picking against a cannabis company that has shown real growth and real profits. But I mean, I’m not saying I’m picking them because when you look at the other side of the break we got two picks from Ross, but Cisco is one that we heard about earlier in the week catching some bids. Akiko, I think I got to choose Cisco here.
AKIKO FUJITA: Wow, look at that.
ROSS GERBER: Yeah, boys [INAUDIBLE].
AKIKO FUJITA: But it pains me to talk about UCLA, by the way.
ROSS GERBER: I’m telling Kim Rivers.
AKIKO FUJITA: Because–
RYAN PAYNE: I’m telling Kim.
ZACK GUZMAN: Don’t tell Kim, though.
AKIKO FUJITA: They were the–
AKIKO FUJITA: But it feels, I mean–
RYAN PAYNE: I know it’s against your morals to vote against weed.
AKIKO FUJITA: We need one Cinderella story in there, right? I mean, Cisco is going to become it, maybe. Let’s talk about Disney and Tesla, which is the other match-up here. Looking at numbers, of course, Disney up 2.5% year-to-date. We are also seeing that– we’ve seen the gains on the stock on the back of the strength in Disney+, but now we’re talking about the park’s reopening, certainly it seems like all things are lining up for the company. And then you’ve got Tesla, which has been under so much pressure over the last few months, down 7% year-to-date. These are both Ross’s picks. So Ross, let’s start with you, which one do you pick?
ROSS GERBER: Well, I’ve got to pick Tesla if we’re thinking longer term, because I think the bottom line is they’re going to have a phenomenal year. You know, Q1 is going to be tough for Tesla, because they’ve got a lot of things moving at the same time. But I think when you look at the Cybertruck and the semi launch and the Austin gigafactory completion as well as Berlin all happening this year, when we get to the end of the year, Tesla is going to be in a phenomenal position, and we expect their deliveries to double over the next year. So you know, we think in 12 months, they’ll be doing over a million cars a year run rate. And this is very exciting, you’ve never seen a car company grow this fast, and we’re not even talking about energy or the fact that they’ve cornered the market on cell production.
Disney is a great company which I love and own a ton of, but I think it’s fully valued here for the reopening. So Disney+ is a huge winner. They’re going to have, I think, some struggles in the reopening making it as profitable as it used to be with all the COVID protections. But I think longer term, Disney is in a great spot too, but it’s just not as exciting as an opportunity that Tesla is.
AKIKO FUJITA: Ryan, I know it pains you to talk about these two stocks. We’re talking about growth on both ends, right? Which one do you pick?
RYAN PAYNE: And no pun intended, with pain, P-A-Y-N-E, of course.
ROSS GERBER: I know, seriously.
RYAN PAYNE: A lot of pain right now.
AKIKO FUJITA: That’s not intentional. That’s not intentional.
ROSS GERBER: You live in pain. You’re a value guy. You live with pain.
RYAN PAYNE: [INAUDIBLE]. That’s clever television. I like that. And you know, Ross, you leave me with two stocks that trade for 150 times forward earnings. Thanks, man, thanks. And the only redeeming quality I can find between either stock is at least Disney is not trading for 20 times sales. So you know, given the fact that only about 2% of Americans drive Teslas, and you know, Ross, I know you live in Santa Monica, the only place in the world people actually drive Teslas. You come anywhere else in the country–
ROSS GERBER: That’s not true.
RYAN PAYNE: No one else drives electric vehicles.
ROSS GERBER: You haven’t been to Shanghai, obviously.
ROSS GERBER: You haven’t spent a lot of time in China.
RYAN PAYNE: Where there’s another 200 electric vehicle companies. So I think competition is going to be stiff. I think, you know, the adaptability to electric vehicles is going to take a lot longer, and I think the market’s priced years upon years upon years of growth. So the less, I guess the more palatable, the two very unpalatable options, I’ve got to say Disney, which again, I think is a bit overpriced here too, because to Ross’s point, we already know the growth is already baked in about Disney+, and I think there are going to be restrictions when you get back into the parks. But you know, if we’re just trying to go to the less painful option, P-A-Y-N-E, I think we have to go with Disney on this one.
AKIKO FUJITA: I have to say, I like how both of you have upped your trash talking over the last few weeks. I feel like maybe there’s a segment beyond–
ROSS GERBER: Listen–
AKIKO FUJITA: The March Madness bracket–
ROSS GERBER: UCLA is in the Final Four.
AKIKO FUJITA: But it seems like–
There’s some agreement here, right? I mean, Ross, I heard you say you still like Disney. You think there’s more upside on Tesla. And then, Ryan, you’re saying if you have to pick between these two, it’s Disney. So I feel like you’ve already sort of advanced the team, and so let’s go with Disney. That might be an upset, even though Disney is a higher seed, when you look at the upside on Tesla. I don’t know, can we call it an upset, Zack?
ZACK GUZMAN: I don’t know if we can. And to be frank, I mean, I don’t know if the seeds really mattered heading into the tournament either, but there they are in our graphic. But yeah, so that sets up our championship here, and these picks do matter, because now it all comes down to finally one winner. In what had started as 16 stock picks, we’re down to two– Disney versus Cisco.
And Disney interestingly, because we were talking about kind of the latter half of that, the park’s reopening. You can make it a reopening value play here, and you can also look at Cisco, as we’ve been debating, kind of a boring legacy tech company even in the words of the man who presented Cisco as the stock pick, Ryan Payne. So Ryan, why don’t we start with you on Cisco. We already heard about kind of why you liked it here, but really sell me on it. I mean, because we’re finally here at the big dance. You’ve got to sell me on this one beating Ross’ pick in Disney.
RYAN PAYNE: Well you know, as the old saying goes, you have to the skate where the pucks going to be. And for the record, I spend more time thinking about my trash talking this week than studying fundamentals, I have to be honest.
I was like, what can I say to Ross that’s going to be really offensive today?
ROSS GERBER: Nothing, nothing you can say.
RYAN PAYNE: But then I started looking into the actual fundamentals of these stocks, just for the record, and you know, basically, I think what it comes down to, again, is I think you have a stock where a lot of the reopening is not priced in. You know, we haven’t factored in all the CapEx spending, and invariably, markets look forward. They don’t look backwards. And you know, a lot of the reopening is really going to bleed into next year.
Because I’m not thinking of– Ryan Payne’s not thinking about 2021, Zack, Ryan Payne’s thinking about 2022, and that’s where capital expenditure gets really interesting. And you know, I think, again, because Disney is already priced at, you know, that’s basically a work from home stock at this point, because Disney+, you put your kids in front of the TV while you were working. It’s all priced in. It’s old news.
ZACK GUZMAN: Real quick, though, Ryan, real quick, because I want to drive in on that, because we talked about it. How much of your pick here on Cisco really hinges on people going back to the office? Because that seems to be important for Cisco.
RYAN PAYNE: I think it is, and I think we’ve discounted how much we’re going to go back to the office. I know personally with my firm, I’m going to keep pretty much an open door policy. But anecdotally, people are just going to the office, because they want to. So I think there is a strong desire to get out of the house. You know, I like to hang on the set with you at Yahoo Finance again. You know, doing it from afar, it just hurts, Zack. It’s just not the same.
ZACK GUZMAN: OK, because that’s important to know, because on the other side–
AKIKO FUJITA: Can we just acknowledge the fact that Ryan Payne is now talking in the third person?
I mean, that shows you the confidence of an athlete. You’re talking like an athlete now.
ROSS GERBER: He’s lost it, he’s lost it.
RYAN PAYNE: It’s three weeks on TV, my ego goes like this.
ZACK GUZMAN: It was a half court heave. I noticed it, I noticed the shot. I’m not going to say it went in the basket. But Ross, on the other side of the pick, I mean, you’re looking at Disney, which doesn’t seem to hinge as much as a return to normal, because you got basically both plays. You know, you got Disney+ and people stay at home or you got the parks.
ROSS GERBER: In fact, that’s what makes Disney 100 times more attractive than Cisco is the fact it’s got a double whammy of earnings growth drivers. And I know Ryan lives in the past, because his picks are like Cisco, which was one of my favorite stocks in the ’90s, actually. And the ’90s were a great time if you were alive then.
RYAN PAYNE: You were smoking weed without a weed pen. Go ahead.
ROSS GERBER: But see, Ryan wasn’t alive in the ’90s, so he just wants to ride the past still. And so I think one of the things that investors have to think about is the future, and the future is a combination of having the greatest streaming service besides Netflix and the greatest family experience that somebody could want to take their kids to. I don’t know if Ryan’s old enough to have children yet, but when he does, do you have children, Ryan?
RYAN PAYNE: Not yet.
ROSS GERBER: When he does– yeah, see, he’s just not even old enough. So once you have children, you’ll realize that it’s not just about Disney+, it’s about the synergy between the parks, the products, you know, the attractions, the movies, going to the plays. I mean, it’s just the synergy of Disney’s unbelievable. So opening everything up again will leverage their success with Disney+ in a way they’ve never had before.
So with the enormous optimism we’re seeing here in Southern California with almost no COVID cases and the success we’ve had, Disneyland is going to be like overrun like you’ve never seen. So I mean, I’m sure they’re going to have to have security just to keep people out of that place. It’s such a winner.
RYAN PAYNE: You–
RYAN PAYNE: Ross, the only time you’re not talking about weed or gambling. The first time, really.
ROSS GERBER: No, I talk about video games and kids stuff all the time, too.
I do kids, and I do adult. You know, I do both.
AKIKO FUJITA: Yeah, but Ross, I’m not sure about no COVID cases in LA, but there’s no question there is pent up demand.
ROSS GERBER: We had 350 yesterday. That’s unbelievably low.
AKIKO FUJITA: It’s going down at a rapid rate, no question about that. To your point, there’s a lot of people who have been wanting to go out, finally Disneyland opening up. I mean, it seems like there’s a lot of upside there. You ride that with the momentum coming from Disney+, and Zack, I don’t know. I’m not sure Cisco has a comparable business on the other side that grows at that kind of rate.
ZACK GUZMAN: Yeah, we tend to avoid risk here at Yahoo Finance, you know, being the network that carries Warren Buffett exclusively here, let’s just stress that fact. And after hearing these arguments back and forth and the fact that Ryan Payne referred to himself in the third person, it’s very hard to go against Disney and Ross’s pick here. I would say that the winner of our stock madness tournament here in 16 stocks going head to head over the last few weeks is none other than–
Disney, after all of that. We’re going to go with Disney as the champion in stock madness.
ROSS GERBER: Yeah, oh yeah. The day gets better and better.
ZACK GUZMAN: Ross Gerber.
Despite the fact that you wanted to pitch Tesla in the semifinals, it’s Disney that takes the cake.
RYAN PAYNE: We’re clearly going to celebrate at a casino when we reopen.
ROSS GERBER: Ryan, I’ll take you out, I’ll take you out for a joint and then some gambling when we’re done.
RYAN PAYNE: It’s on, brother, it’s on.
AKIKO FUJITA: Ross, we’re going to try to get you a print out of that bracket with your hat on so you know–
ROSS GERBER: Thank you.
AKIKO FUJITA: In fact that you did win the Yahoo Finance–
ROSS GERBER: I will post it daily next to Ryan’s picture.
AKIKO FUJITA: Yeah, although, a number one seed winning seems a little predictable, right? But hey, you went at it for several weeks here. We got Disney and Cisco to the finals, and Disney it is for the winner of the March Madness or stock madness tournament here at Yahoo Finance. Ryan Payne, Payne Capital Management President, and Ross Gerber, Gerber Kawasaki Wealth & Investment Management CEO, it’s great to have you on for the last several weeks, but we hope to maybe we’ll think about another segment we can get going between the two of you.
ROSS GERBER: Stock Olympics.
RYAN PAYNE: The void in my life is going to be so dark without this. Yeah, so we’ve got to do something.
ROSS GERBER: Yeah, enjoy your Webex. Enjoy Webex. Have a good time.
ZACK GUZMAN: Congratulations, Ross.
AKIKO FUJITA: Thank you so much, guys. Congratulations to Ross. Thanks so much for that.