People keep asking me why I give the WallStreetBets people a hard time on so many different realms. The answer? It's because they are possessed with some sort of ridiculous zero-sum class struggle with enemies on the other side of the trade. They want to smash the short sellers, they want to crush the hedge funds. They view me as a tool of the hedgies and they give me an endless hard time about what's not true. They aren't investing as much as playing some sort of blood sport where they must beat the man, the man who has stuck it to them their whole lives.
I believe investing is about finding good companies with stocks that sell at a discount to what they are valued. I want my charitable trust Action Alerts PLUS - I can't own individual stocks - to buy stocks on the cheap and wait until their value comes out. I don't care about who is on the other side of the trade. I care about my side of the investment.
The memesters are, as we know, possessed with GameStop because they were able to smash the short selling hedge funds, bring them to their knees, by taking the stock up quickly via a blitz of call and common stock buying. It worked and lots of the Bettors made a lot of money. I think that's great. Good for them.
But what I resent is the insistence by these same winners that the reason why they have won is that they are backing an insurgent, Ryan Cohen, now chairman, who was a co-founder of Chewy, the fabulously successful pet food company e-company. His work at Chewy has made it a sure thing that he will turn around GameStop, they say, and he will do it now that he has installed his team of Amazoners and it's ready to roll.
I say, wait a second, if you idolize Ryan Cohen, who is now chairman of GameStop, because of how great Chewy is, how about buying the stock of Chewy, which was down badly today on what was a very good quarter.
Last night we had Sumit Singh on and he talked about how his company is winning on so many fronts, whether it be the inclusion of deluxe pet foods, or petscriptions and healthcare, or simple things like dog birth cards, which make you love Chewy and then get you to subscribe on auto renew for your pet's food. They have about 20 million customers with a huge percentage on auto renew, which can explain why they have huge and expanding gross margins. They are getting more and more sales per customer and the longer a customer stays in the fold the more they spend.
It's easy to see why. They send you portraits of your dogs, condolence notices when they pass away and as I learned from Marilyn in my twitter feed, a dozen roses after her cat, Squeak died, something that certainly works to turn people into dedicated customers.
CEO Sumit Singh, used to work at Amazon (AMZN) . He understands scale. But he is accomplishing the impossible, creating individuality at scale, something that I am sure Ryan Cohen, who is no longer involved with Chewy, must have learned.,
This week GameStop plummeted when Ryan Cohen gave shareholders no plan to improve GameStop other than to sell 5 million shares to raise money.
But Singh? He gave you a list of 6000 centers to adopt dogs and told you about 7000 vets who are helping in his healthcare initiative that can help bring down the cost of owning a pet without sacrificing quality. He talked about the long-term value of customers. But because he only did an in-line new subscriber numbers, his stock got clobbered.
Which would you rather have? A knocked down stock of an also-ran, out of date, brick and mortar retailer with a very uncertain future run by an ex-Chewy guy, or a terrific, dominant e-retailer with a crushed stock that's run by a current Chewy guy. I don't know about you but I would take the latter any day of the week.