Yahoo Finance’s Julie Hyman and Brian Sozzi break down the market action with Heritage Capital President Paul Schatz.
JULIE HYMAN: Finance Live. We are awaiting the opening bell in just a few minutes. We're also, of course, awaiting DoorDash to begin trading today. Airbnb set to price after the close tonight and begin trading tomorrow. What does the popularity of these IPOs tell us about market sentiment right now?
Paul Schatz is still with us. He's president of Heritage Capital. Paul, we earlier talked to Brianne Lynch who focuses on just pre-IPO companies-- that's what her investment platform does. And I asked her, what is the seemingly indiscriminate buying of all of these IPOs and other types of public listing SPACs and direct listings this year? What does that tell you? I've been talking about the phrase thirsty cash lately. That people just want to throw their money somewhere.
PAUL SCHATZ: This almost feels like the next gen dotcom bubble. So before I get all the ats, how wrong I am because the companies actually have revenue, I get it. That's why it's next gen. But you only get this kind of landscape when you have full on greed and euphoria. And it takes so many different-- it's a perfect storm, frankly. So you've got obviously zero interest rates. Nobody cares about that. No one's going the bond market right now. And you've got a market that completely collapsed in the first quarter and now is partying like it's 1999.
So it's really enticing so many people who have been sitting and waiting and waiting and waiting-- look, after the corona crash, so many people-- look, cash levels were almost at all time highs in a short period of time. And so many people couldn't parse how the data and the markets are diverging, and now they're going all in because you've got new stocks coming out, this whole SPAC wave is replacing private equity, supposedly. But you have, again, this perfect storm of liquidity and of greeting euphoria and that's why everyone's just going all in.
BRIAN SOZZI: Paul, that optimistic mood for me just completely went away when you're talking about some of these IPOs. Which-- in your view-- which company? DoorDash or Airbnb? Which company do you hate more, and why? Which business model do you think really stinks?
PAUL SCHATZ: Well, I'm glad we're coming at it from the negative side. So if you-- gun to my head, if I had to-- I would take Airbnb over DoorDash, probably because DoorDash has some pretty stiff competition right now in Uber and the likes, and Airbnb, not as much so. But competition will increase over time.
Listen, as I said to you during the break, I wouldn't touch either one with a 10 foot pole. I wouldn't buy it with your money, Julie's money, and Adam Shapiro's money. So my view on the hot IPOs-- and 32 years doing this, I've been wrong. But my view on the hot IPOs is, you do nothing out of the gate. Unless you've got friends and family shares, you sit back and you watch, and there's a three to six month period where the vast majority-- I'll do a newsletter on this shortly, because I do it for every hot IPO. And I publish all the charts of previous hot IPOs.
And the vast majority have that initial kick, and they spend three to six months in volatile territory, but I'm balanced going significantly lower. And I think if you love Airbnb or you loved Uber-- I said send in Uber and Lyft, and Square and Alibaba. You sit back and wait. Every once in a blue moon, you'll get a Google, which doesn't have that three to six month decline, and I'll be wrong, frankly. But most of the time it pulls back, I don't love feeding into the euphoria. I'd rather be a seller of stock. And there's an old expression on Wall Street, when the ducks quack, feed them. And Wall Street is certainly feeding the ducks right now.
JULIE HYMAN: If you bought Google three to six months in, you're still doing pretty all right. Even if you waited and the dip didn't happen, and you still bought. We were talking during the break, Paul, about OK, so you're not looking at these hot IPOs. What are you looking at right now with valuations where they are? Do you see entry points for anything? Maybe travels-- you were talking about traveling earlier. Maybe travel stocks?
PAUL SCHATZ: Julie, it is really hard. Every day I come in and I look for opportunities. That's my job. And I love what we own and I love what we have. I'm finding hard to spot opportunities that check all my boxes, because I, frankly, my personality and the way I run money is I won't buy something that's melted higher, even though I think it's going higher. It's just not what I do. So I have to find companies and sectors and ETFs that are checking all my boxes.
It's been really difficult. And I'm not going to change what I-- I remember the same thing happened in the dot com bubble. Now, it's a little better. We've got a more broad based rally so that things like GWPH in the cannabis field, that's a real nutraceutical company. I think that one could have a takeover behind it at some point, and I think that could have legs to it. And it's pulled back. I'm looking for stuff-- we bought Las Vegas Sands a week or two ago on a play on that Macau is going to return. That's the, for me, the best plan for Macau.
But again, it's hard to find things that fit in your little bucket. Zillow was one this week that had consolidated and has a nice tailwind behind it. And Draft Kings had a beautiful pullback that we bought twice. But I'm really cherry picking and pulling things that are outside the norm. It's more difficult. You have to almost close your eyes, and if you have to put money in, drip it in. I would not use these kind of markets to go all in. I think that that's one that the latecomers get punished harshly when the market reverses, like it did in January of 2018. Very similar market that pulled back 13% in a couple of weeks.
JULIE HYMAN: Paul Schatz, Heritage Capital president. Thank you so much, as always, for giving us some insight into how you think through the market. Appreciate it.