When legendary investor Mark Cuban says something, I listen, especially if he is bullish because he's such an informed skeptic.
That's why I was blown away yesterday when he was asked on Fast Money about the fact that four stocks - Amazon (AMZN) , Google (GOOGL) , Facebook (FB) and Apple (AAPL) -- now make up $2 trillion in market cap. (Google, Facebook and Apple are part of TheStreet's Action Alerts PLUS portfolio.)
His answer? "In terms of stock price? No, they are all undervalued."
Simple. Because of what they can do with machine learning and artificial intelligence.
I couldn't agree more. One of the reasons we keep going out west so often is because, like Mark Cuban says, "I need to retrain my brain because I want to see the business application." He knows how powerful these are for doing business better with fewer people.
His largest position? Amazon. "It's the ultimate AI company, it's the ultimate start-up company. When they talk about opening grocery stores, it's not because they want to sell groceries in stores. Same way with books. They want to know what you need when you need it before you know you need it so they can deliver it to your door in anticipation."
And boy, is he ever right. If you want to know exactly how correct he really is, go listen to the Nordstrom (JWN) conference call last night. Nordstrom at one point was the finest merchant in the land. They offered the best personalized service. They knew what you wanted because they had fabulous sales people. If you got it wrong, they had a legendary return policy.
But last night you found out that they don't know nearly as much as they thought they knew. They are still trying to leverage their bricks-and-mortar flagship stores but with minus-6.4% comparable sales numbers, they may just ultimately be going by the wayside. Sure, they made a point of saying their Nordstrom namesake stores are all cash flow positive, but let's understand the way things are going here. It's not like millennials are going to change their minds and start going back to these stores. No, what will happen is there will simply be more young people who use Google or Amazon to search via their Apple phone and do some very targeted buying.
At one point, I felt terrible for the Nordstrom brothers when they were talking about patterns they were seeing, for instance, a Rack store near a full-priced store tended to lead to migration to full price.
I found myself thinking that Amazon is so much more sophisticated, it could probably predict exactly what age and what gender would go next door and what they would buy and give you a coupon before you went. It's just not fair. I always felt that Nordstrom has been fighting its crosstown rival in Seattle, with one arm tied behind its back because of its asset-heavy model. Now it's both hands.
I am totally on board with Cuban about Facebook and Google. I was a little shocked yesterday when Facebook's stock didn't rally with Snap SNAP even as Snap was treated like a snack for Facebook's Mark Zuckerberg. I think the copycatting of Snap by Instagram is behind a lot of what now looks to be the reason why Snap failed to deliver the robust revenues we were expecting.
Google has more artificial intelligence going for it than any company other than Amazon and it's levering the work for autos and robots, not just search. It's cheap on the numbers, and while Cuban didn't want to put Apple in the same class of these others, he didn't make a case against it.
All in all, if you are against a company that has machine learning, deep learning and you don't have artificial intelligence going for you, then your fate will be like these retailers we see on our screens and the forecast will be in the vernacular of Mr. T: Pain!
Cocktails & Cramer
Join Jim Cramer on May 23 for an exclusive party at Bar San Miguel, his Brooklyn tavern.
You'll get to watch a screening of Mad Money, after which Jim will arrive fresh off the CNBC set to mingle, pose for photos and answer your investing questions.
Participants will enjoy dinner, drinks, an autographed copy of Jim's book Get Rich Carefully and a free one-year membership to Action Alerts PLUS, Cramer's VIP club for investors. (Current AAP members will receive one extra year of membership for free.)
When: Tuesday, May 23, 6-9 p.m. EDT
Where: Bar San Miguel, 307 Smith St., Brooklyn, N.Y.
Cost: $375 per person
Space is very limited, so click here to reserve your ticket to this exclusive event today.