Companies don't know how to deal with the new world. What's the new world? It's the economy of Salesforce.com (CRM) . It's the payment system of Square (SQ) . It is the speed of Nvidia (NVDA) . It's the protection of Okta (OKTA) and PagerDuty (PD) . It's the analysis of Tableau Software.
These are the companies we celebrate here. These are the ones with stocks that lead the Nasdaq that I need you to understand so you know what you are getting into -- to know what you are buying.
To the uninitiated, these are all just names of some West Coast companies with a lot of execs who speak some sort of computerese that makes no sense unless you know how to code. Your eyes not only glaze over, they are epoxy'd shut.
I need to pry those eyes open, because when you see a stock like Target (TGT) up gigantically, or when you see lifelike video games, or renderings of astronauts safely landing on Mars, you aren't asking how did they do that because you want to own the stocks of companies that helped do it.
Why do the strengths and attributes of so many of these companies elude you? I think it is worth spending some time talking about not just what these companies do, but why you don't know them because the reasons are often they don't want to be known.
Let's start with why these companies are so necessary. The chief reason why is that almost every company on earth, every enterprise large and small, unless it just started, has the wrong system, a system that isn't customer-centric and costs too much money to manage. Unless you are in an enterprise you might not know what a system is. You need to think of it as something that takes in a lot of data, stores it and allows you to figure out what to do with it faster and better than the competition both online and offline.
For the longest time, companies kept their data by hand and dealt with customers who came to them. Then smart companies decided to computerize with machines on their premises.
Now, though, companies recognize that the only really efficient way to do business is to take all of that data and put it in the cloud, the same cloud that you interact with when you download a Netflix (NFLX) movie or order something from Amazon (AMZN) . You need to think of those two companies, because they are customer facing without a brick and mortar alternative.
Next, I want you to mull the problems that an enterprise might have with the new world. Typically their systems are known as "legacy," meaning that they were built for customers who didn't care about speed and didn't care about interaction because they pretty much assumed it would be bad. Many of the younger people paying attention don't even recall what it is like to be left on hold or have a website where you just constantly had some spinning circle or where there was no one ever available to talk to. Lots of industries had systems that worked for thousands of people, but not hundreds of thousands or even millions. If they were small they couldn't afford to upgrade. If they were large they often didn't know how to upgrade.
There's a reason, for example, why the stock of Lowe's (LOW) , the retailer, screamed higher Wednesday. You are seeing the impact of the hard work behind the scenes of Marvin Ellison, the CEO, who has had to install systems that were robust, so to speak, to handle the millions of customer interactions before they were so turned off they went to Lowe's.
As PagerDuty's CEO, Jennifer Tejada, told me "There's real money on the table. A large retailer can lose $500,000 a minute if the checkout goes down during the busy season."
That's now unacceptable. Just look at Sears (SHLDQ) . You think it can compete at that level? I am beginning to wonder of Kohl's (KSS) can. Or Nordstrom (JWN) . It's just too expensive and it requires a vision of losing to others, not winning, which is what Kohl's actually thinks it is doing. Delusional.
Lots of companies think that getting the customer is enough. Not Salesforce, which is running the 170,000 person cavalcade of coding called Dreamforce that's going on out here and attracts us every year to this event. Salesforce knows that landing a customer is the beginning, and knowing what that customer wants and keeping that customer happy in any way it can, is the next level. Not that long ago Salesforce's Marc Benioff bought a company called Tableau Software. He paid a lot of money for it. I think it was worth it because Tableau lets you mine the data to reach conclusions that can build sales. You need the whole suite of products to keep the customer happy and grow sales. While Salesforce is much more than that, it sure is instrumental in the customer 360 pleasing process.
Now if you go down this path of pleasing millions of customers you are going to run into bad guys who want to take advantage of your systems. They are going to pretend to be other people in your organization to steal and cause mayhem. They are a fact of life and you need to have these miscreants stopped before they rob you blind. One way to do it is to create a ring around your enterprise. Another? To know exactly everyone is.That's what Okta does. I know, nuts and bolts. Who cares? I think you must care if you care about money, because if you understood how important Okta is to so many companies in the Fortune 500, you might have caught a 100% gain in your stock.
Sometimes I wish I were a big video gamer. But I am surrounded by youths who live and die by "Call of Duty" and "Red Dead Redemption." Sure, you can buy Activison Blizzard (ATVI) and TakeTwo (TTWO) -- I like the stocks of both.
But what makes these games so lifelike? Why are their movements so smooth and realistic? How is it that even the foreshadowing's perfect? That's Nvidia, that's what their chips do. Of course their chips also allow for simulations, millions of them, that can be used, say, to manage driverless cars that would otherwise be smashing into pedestrians and other vehicles all of the time. You can't know Nvidia unless you do something that it's involved in and, even then, you don't know it's Nividia's because it isn't demanding a nameplate. The company is hidden. I am trying to change that. I want you to know Jensen Huang, the CEO. Again, why? Because Nvidia's stocks was at $20 four years ago and now it is 10 times that. You have to understand what it does to own the stock. That's my job.
Finally, you need to know how these companies can be force multipliers. I am a small business person at heart, like my dad. When we opened the Dubary Hotel, we didn't have any systems. A few years later, because of technology, namely Expedia EXPE and Airbnb's HotelTonight, we can fill the place. We open a bar and we can't believe how important payments are, point of sales, customer retention, reservations. Delivery, website, coordination with payroll, everything is, and much of that starts with Square.
Once upon a time, none of this existed. Big companies had computers, the rest of us had pen, paper and adding machines. Now we all have equal power, right down to the look and feel of our faces to customers. We were a manufacturing nation that made things and sent them overseas. Now we are an asset light nation that sells things. Or let me put it in an ironic way that you can best understand: For most of my career, the stock symbol PD belonged to Phelps Dodge our largest copper company. Now it belongs to PagerDuty, a perfect metaphor for the time, and unlike Phelps Dodge, a very investible one.