Chit Chat Stocks - Gannon Breslin | Advanced Micro Devices (AMD)

Episode Date: December 19, 2020

On the 19th day of Christmas Gannon Breslin gives to you, AMD. AMD stands for Advanced Micro Devices and although not everyone has heard of AMD, it is very likely you use their products. AMD produces semiconductors which assist in the creation of almost every electronic device. Visit our website: https://www.chitchatmoney.com/ Subscribe to 7 Investing with the code "CCM": https://7investing.com/subscribe/ Follow Chit Chat Money on Twitter: https://twitter.com/chitchatmoney Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to 25 Stocks of Christmas presented by Chitchat Money. Today we have an interview with Gannon Breslin and we're talking advanced micro devices. It's AMD. It was a lot of fun. He talks a little bit about his own investment philosophy and sort of the way he structures his investments. I know he owns a lot of names, but that was fun as well. But before we get to that, we have a sales pitch, which we've got to start spicing up. I think our sales might be declining a little bit. Yeah, sure. Yeah. We got to make sure. Well, we're the worst sales department out there. Yeah. We got to make sure people know why they should subscribe to 7investing and get their recommendations. So why should people run? Because it's a tremendous customer value

proposition. You are getting seven incredible analysts with incredible analysis. And diversity, like diversity of investing, whatchamacallit, sectors. You got biosciences, You've got SaaS, you've got, you know, traditional value, retail. Whatever your flavor of investing is, they cover it. And I mean, well, they've done really good. They've done, they've beaten the market by a fair amount. So the, you know what, I'm going to call it an investment, not a price. You're not just paying for it.

You're investing in it. You're investing yourself. Sure. All right. All right. And we got to say, we got to say what it is. Oh, code CCM. You get $10 off your first month and it's usually $17.

So you're only paying seven bucks. There you go. Welcome to Chit Chat Money. On this show, host Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investment. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are not financial advisors. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guest is not formal advice or a recommendation. Now, please enjoy this episode. Today we're welcomed by Gannon Breslin. You may know him from Twitter. Gannon, what's

your Twitter handle? My Twitter handle is RebelMarkets, all one word. Okay. And how did you get into the world of investing? This is your first time on the show, so a little intro background here. Yeah. Thank you guys, first off, Chit Chat Money, for having me on. Super stoked to be here. I got into investing at a pretty early age. I was, I believe, starting senior year of high school or it was junior summer. And I had been thinking about it for a long time. My parents were investors. And long story short, I had a friend who kind of pulled the trigger and started

in an account and that made me, uh, finally do it. So I, I, I got into investing and I didn't have, you know, basically any money at the time. I didn't have a job either. Um, so I started off small. I started off day trading, penny stocks, um, high volatility. And even though it was an absolute rollercoaster of emotions and crazy trading and reckless trading, to be honest, um but it taught me a lot of things and it helped me become the investor that i am today how would you uh i mean you talked about the i guess reckless early days how would you describe your sort of investing strategy now are you more like concentrated just uh pure equities yeah so um you know i guess the really the uh classic saying is the only free lunch and

investing is a diversification. Um, I've totally changed my, uh, outlook in reality before I was kind of this day trader swing trader in early college. Um, and I wasn't, I wouldn't say it was a bad one, but I would definitely wasn't a good one. And a lot of the time I would just end up back to, you know, ground zero where my account would go up and then down and then up. And then, you know, no appreciation over time. Uh, today my investing has really found its, uh, stride, I would say in just investing in good companies for the longterm. Um, you know, every once in a while do get that itch and do a, you know, swing trade, but my swing trades now are, I would say more four to six months long instead of two to three weeks. Um, so I, uh, keep that, keep that

in mind when I say swing trade. Um, but in reality, I'm trying to build long-term wealth. Um, I'm now across other assets. I kind of have my, my index funds that, and that I is like my bedrock, I would say. I have my long-term holds, what I like to call them, where I'm just not worried about them. If there's a dip in those, I'm buying. And those are always big cap, very strong companies that will definitely likely be around for 20 plus years. And then I kind of focus my spot speculative plays that are usually tech-orientated because that's the most comfortable field that I know well. And in reality, my investment process is I have those categories and let's say my speculative tech stock goes up a good amount. And remember, I don't have that much

of my portfolio allocated to that. Nothing more than 3% to 4%. If that goes up and is a real gainer for me. I sell for profit and I cycle that into my long-term holds. Once my long-term holds get overheated, I take some profits there and cycle that into the index funds. So it's kind of this tiered process of safety. And I've recently got into some crypto. I had been in crypto before, got away from the scene and kind of back into it just because of how much inflation is impending in my mind. And currently right now I'm saving up for a real estate investment. So really trying to diversify across all those. Yeah, quite the range there. But the company we're talking about today is Advanced Micro Devices. Most people maybe know them as AMD.

D, how'd you find this company? Yeah, so AMD, I've kind of had a, I feel like I've had a long history with this company going back to when I day traded in quick swing traded. This was, you know, back in my high school. AMD was like one of the hottest stocks and this stock was trading at 10, around eight to 10 to $12.

Um, and I used to day trade it. And back when I day traded, you know, it was purely technical analysis, you know, um, Santa Claus could have been the CEO. I didn't care. I was totally just looking at the charts, you know? Um, so I didn't really know anything about the company and I didn't know why I went from $2 to $10. And you know, I, I just was totally on the whole stock twits vibe trading this company based off the charts. Um, and over time, uh, something that really struck my, my radar and how I began to really look at AMD in a different way was I randomly came across, uh, an article about Lisa Sue, the CEO. Um, and you know, how fantastic of a CEO she is and all the accomplishments. And, um, I think we all know that a good CEO can really

turn a company around and, and she's turned this company around from, I mean, nothing to, you know, superstar status. Um, so that's how I got introduced to it. Um, I didn't end up going long as in, you know, buying shares to hold for, for longterm up until about the 40 low $40 range. That's when I really started to do my research and, um, really look at the financial statements And, you know, that time between $10 and $40, that was a good couple of years. And that's, those years were a shift in my investing ways, I guess. And that's when I really started hitting the long-term investment type of strategy. right and what does AMD do I know the name gets tossed around with Nvidia Intel maybe Taiwan Semiconductor how do they fit into the semiconductor industry right so um AMD obviously they develop computer processors and related you know business and

all things really inside of computers and and and those types of machines um the thing is when i answer this question each year it can change you know first off there are strictly this next there are this and that's one of the big biggest things that's why i like amd lisa sue has really figured out that esports is really the future you know so they've cornered the gaming console chip market um you know they're going head to head with intel um in the battle you know of processors uh with with cpus and such like that um so they do have multiple competitors but um it is a kind of complex space where you have multiple competitors uh it's almost like a like a ecosystem of of competitors sometimes they're competitors and one thing

and sometimes they're not you know uh but i would say their most head-to-head competitor would be nvidia or intel and then you you run into uh depending on what other products they have it can be like micron and and those other uh computer type um companies what about management i know you mentioned was it lisa sue is that the name yes and yeah lisa sue um you know she was born in in taiwan and i did a whole uh twitter thread i mean i've been talking about and this is probably how you you know you guys found me is maybe um is how much i talk about amd and their journey on my twitter um i've probably tweeted about amd more than anything that i've tweeted about. Um, but yeah, Lisa Sue, she was, uh, you know, just a quick bio of her. She was born in

Taiwan and, um, she's, she started off, she, you know, she went to MIT. She's a super genius electrical engineer. Um, and she, she was brought on to AMD in like, I believe it was 2012. Um, and she's just totally changed the entire company and the biggest thing that people have found for her is she, unlike Intel, um, really focused on the gaming industry. Um, and that was kind of like a sleeping giant for, I feel like for, for, for many companies, they didn't realize how big e-sports were, were, were becoming. Um,

and my roommate all throughout college, I was, and i know this is kind of a abstract thing but he's a huge gamer and a huge computer nerd he builds uh builds computers and stuff like that and so that's kind of where i got that information from because like i was saying before i'm not a computer expert um he is in a way and so i was always asking you know hey what's better amd or intel like for this chip or whatever and he goes oh yeah amd everyone uses amd because he's a big gamer and streamer and stuff like that and i was like huh i wonder why you know so that's what kind of sparked my interest um but yeah when she was appointed c she was appointed ceo in in 2014 um and she's just

you know won tons of awards uh for her leadership and really focusing on that that that gaming industry and and taking over and um the proof is in the pudding because if you ask almost any gaming person they're going to say amd has better products for gaming than intel almost head to head every time interesting and they're in the new ps5 correct yes and the new xbox as well okay yeah yeah sort of a exciting time for them um you do want to kind of touch more on your thesis? I know you briefly mentioned it, uh, but I don't know. Why do you like it as an investment right now? Yeah. Um, you know, there's, Oh, when I say this, I don't want you to, I don't want people to think this is like the, the sole reason why I, um, you know, investing in

a company. Um, cause there's, there's tons of reasons, but one of the big things that I always think about is the David and Goliath kind of story. We live in an environment right now in the market where people root for the underdogs, you know, people who are just now starting to invest. And I really do think that in the past three to four years, we've had more new investors than any other time. I don't have the hard data on it, but I would be arguing that we do just with all these apps and stuff on people's phones. And what do people invest in? They invest in things that get people excited, especially if you're a new investor. Cause I remember when I was a new investor, when I was a new investor, I didn't, you know, go on, um, to my brokerage

and go, Oh, I'm going to go buy, um, you know, general electric, you know, that doesn't get you excited. You know, you want to see something, you want to use that product. Um, and for me, that's that's intel versus amd you got intel who's the the monolith you know they have all the money they have all the market cap they have have all the market share uh well they did um and you got you got david little david uh amd you know and i this is a simple quote but when you have everything you have everything to lose intel has everything to lose you know that they're a company that's been around for decades and just have been controlling the entire almost been in some cases in the in the past decades not so much now obviously almost like

a monopoly um and you have this rising star and the thing is intel has been fumbling the bag left and right uh when it comes to their releases um and then when it comes to head-on uh products um tom's hardware did a really good article talking about amd versus intel and they broke down obviously you know this could be a biased source but i have a hard time believing it's too biased um basically head to head which is better you know and amd beat intel in cpu pricing and value gaming performance content creation specifications power consumption process node architecture and security intel only beat amd in overclocking and drivers and software and this is a website that all they do is talk about this stuff you know this is this is their

bread and butter. And when you're an investor, you know, AMD is just one of the 30 plus positions that I have. I don't have time to where, you know, I'm going to go on the street and interview every single person. What do you like more AMD or Intel? Or I'm not going to go take a computer course just to see if, you know, what down to the granular level, what's better about AMD and Intel, You know, but articles like this and other articles are the things that really, you know, point my head and make my head turn. And it's been proven in the past couple of years that there has been Intel has had some fumbling of the bag per se when it comes to coming out with their chips, whether it be a late release date or AMD just outright beating them. And that's what's really honed in my focus and made me just buy and buy more and more shares along with, obviously, you know, the share price acting accordingly. So I guess is the main crux here that Intel has a giant market. They, I mean, have been the dominant player.

They're slowly eroding that to AMD and they've shown year by year the last five years that they've won. And I think the big thing is that seven nanometer chip hasn't really, it just keeps getting pushed back. And that A and B with that new executive team, I forget her name, but they brought in the engineers and just the way that business runs is just way more agile than someone like Intel. Definitely. You know, it's like kind of like the concept of Rome, you know, when you're such a big company and you've been around for so long, you get complacent. It's impossible to not get complacent you know right um you know intel i'm not saying intel is a bad stock to own in in any sense of the word you know um for instance you know they got they have a great dividend they

their market cap is 206 billion dollars um one thing that intel you know they still have a slight they do have advantages in in other areas in amd one of the big things is and a lot of people point out is Intel spends so much money on research. I think I can't remember off the number off the top of my head, but it's like almost five times more than AMD. They spend billions, tens of billions, billions of dollars on research, um, and development, which, you know, over time it's going to matter because that's what the, the, the graphics card game and the cpu game it's all about who can come up with whatever's bigger or not bigger i guess smaller in this case smaller faster better more efficient you know um and these companies are doing to

going to do whatever it takes to do that and if it means spending billions of dollars in research and development they will um because it it really is a yes or no decision with with uh when they sell their product? Are they going to go with this guy or this guy, you know, and you got to edge out the competition. Lately, AMD has been edging them out. But who knows, you know, when one person is spending, let's say $1 on research and development and the other guy's spending, you know, $50, it could hurt that person in a long time, in the long term. Yeah. And I think, I mean, there's also the side of who's spending that money more efficiently. I guess if you're on the if you're a fan of amd you can look at it and say well look at all this money

intel's plowing into it and still amd sort of has the lead um and i know or maybe not has the lead but they've gotten vote of confidence from both xbox and playstation who obviously don't take that decision lightly as to who their gpu provider is going to be right yeah or cp okay um yeah definitely um you know yeah that's always a good point and and that's why i'm falling right into why i am an amd investor um now if you do want that security obviously you know you might want to go with the with the intel choice because you know if you got a if you got retirement stuff like that then there's a lot more advantageous uh qualities about intel that you don't have to even you know lose any sleep at night over um however

a thing that uh that has recently occurred and this was something that i was kind of again raving about on twitter is that most recent earnings amd announced that they're buying out this company called xilinx for 35 billion dollars right and well that was a huge deal obviously um because that was kind of a sign basically that hey we're we're coming after you intel you know um we we were really really trying to go one-on-one here with with the other products that intel makes you know um and xilinx is the number one provider of adaptive computing solutions and it basically just increases the tam of amd um so it's gonna be very interesting and it's hilarious and most often than not usually the company who's buying another company they have

you know a loss in share value that day share price value amd i believe even though they had a great quarter uh they were down like four percent that day and because they bought out a company bought out xilinx or announced they were xilinx was up like eight to ten percent i believe and i was just tweeting like guys like if you're not buying amd right now when it's down on literally good news like uh i don't know what to tell you you know um so and i even called that i was like watch like jim cramer's gonna talk about this and like has i actually tweeted i was like is has jim cramer already talked about this and he ended up talking about it like that night like i don't know how you he loves amd so i knew he was going

to um all right as i think that's a good overview of the investment you have any more questions Ryan? No, that's it for me on the first half. We're going to hit a quick break, and then we'll try to poke some holes in your A and B thesis. Cox Panoramic Wi-Fi includes advanced security to help protect all your connected devices.

You'll get real-time alerts. Oh, like this one, so you don't have to worry about malware. Or when your kid downloads a song from a shady link. And now all your computer can play is... Red color, red color, where are you?

all blocked thanks to advanced security included with cox panoramic wi-fi advanced security must be enabled in the panoramic wi-fi app restrictions apply welcome back in next up we have devil's advocate uh for most of the listeners you know how this goes but we've got a few counterpoints to try to let ganon refute here i'll go first we talked about intel sort of slacking and maybe resting on their laurels a little bit and they've obviously given way to AMD's rise and in turn, a higher valuation for AMD as well. In the event that Intel starts to get their legs back under them and were to produce that, what is it? Seven nanometer chip? Or get it out faster. Yeah. That could really impact AMD and potentially cut their

valuation in half or maybe not half, but reduce it in a big way. You know, so when it comes to investing and, uh, my stocks and everything, you know, I've, I've held AMD for a long time, but like I say all the time, um, never fall in love with the stock. It's a con you're constantly evaluating a position. Um, even though AMD has made me a ton of money and I'm, I'm, I'm long when something comes to light, like let's say there's a reversal in the trend and Intel starts making these big gains um you know that's that's when i do i don't just shun those out if anything i tend to look at the bearish case of uh positions that i own more than the bullish case um but really going back to your to your point i think the thing that i want to counter that with

is branding um amd has really put the stakes in the ground when it comes to esports so much more in my opinion than um intel and this is a big big deal because esports is getting huge um you got league of legends if i'm sure there probably will people who don't know what that is on here listening on here but it's basically a game in in asia uh on the computer um it's a huge game it's a very competitive game they had more viewers i believe in 2017 than the super bowl uh in their world championships it's called um so this is a huge market you got magic johnson you got michael jordan you have all these athletes investing in the esports and who is the number one person that the number one company i would say uh leading that charge is amd um so in reality

and and then covid fell right i guess right into amd's lap as well because during covid people were gaming at a higher pace than anything at least at least i was gaming a lot more than i normally do um so i guess my counterpoint to your counterpoint is i think that you know it is very possible that is always a reality that you know intel's research and development they could come out with something that is better and faster than amd um but that's just not true right now um you got amd beating intel head-to-head in that in that in that article um i think it was what seven out of ten categories or eight out of ten categories um but like i said anything is possible intel could come out with a better product in the future and the tide might change um but that doesn't

necessarily say that ps4 and xbox whatever new future consoles are going to immediately switch because we all know that they don't put the best hardware in these in these consoles you know they're not going to put a thousand dollar or four thousand dollar chip inside of a ps4 you know you you can't do that um because then the ps4 would be six thousand dollars uh to sell you know um you have to remember that a lot of these competitions that we're talking about here are are about chips that the normal person doesn't have you know um that like currently right now i have a pc i have a nzxt which is a pre-built um pc right and my roommate he has his custom built pc that's over like two i think it's like two and a half thousand dollars i don't do the

type of gaming and the streaming that he does at all um so i don't need that you know i don't need the four thousand dollar uh new chip that just came out um so you had to remember the context here that some of these chips that people are talking about are chips that yes are extremely important um but those aren't the chips that a lot of people are just putting into their $700 PC build. You know, those are chips that are on a whole nother level. Those are not the chips that are going into your PS5, the Xbox Series X, etc. All right, I'll hit my counterpoint then. So we're seeing the big bump here from COVID and then the next gen gaming consoles. I think a lot of that might be, you know, it could be priced into the stock and that's helping AMD a lot now.

it's driving a ton of demand are do you worry about this being temporary an example of the cyclicality of a business in this industry yeah um so that's a very good counterpoint um a lot of people i mean i even saw a tweet today talking about oh this you know this feels like the 1999.com bubble all over again things going on right now um and in reality my counterpoint to that and it's not a perfect counterpoint because i want to say again you these are very valid points i'm i'm always under the uh idea that the more you you know the more you know the more you realize you don't know. So, uh, I'm, I'm never a hundred percent on anything in reality, uh, because things are always changing and your counterpoints can be extremely valid. Um, but what I lean on

is that the kind of the, uh, 1999.com bubble, uh, thesis is that the problem about that was, and this is gonna sound like a classic well this time it's different of course but that was in 1999 you know in 1999 and 2000 when when these these dot-com companies were were booming we really didn't know what these what a what a website was capable of i at all you know we didn't know what yahoo was capable of um and that's why i feel like those valuations got so crazy high and and i will be the first one to say that they are very there's a lot of companies that are very high right now um i mean just today we saw airbnb you know get priced at whatever it was 150 145 which is about 70 higher than what i would pay for it um or wanted to pay for it i would say

so i feel like that that's kind of one of those questions but now we have 20 years later we have this kind of a new grip on okay you know a website isn't gonna make 40 50 billion dollars we can figure out kind of more what what it can make and and when it comes to tech and uh these chips it really comes down to the numbers and the revenue and i don't think amd is overpriced even though it's at um what's it at right now i want to say like 95 or close it's probably down right now 90 92 91 um i really don't think it's overpriced because of the direction that they're going um with the esports and all the promise that's there and you kind of have also the you know the CEO, that's why I see Tesla so, so deadly and, and why I like that as a stock, um, not to buy

right now, but when I, when I did buy, um, is that when a company is doing the right things and then they also have the right leader behind it, you know, that's a very powerful thing. Uber was doing the right things, but they had a bad CEO behind it. And that's why it stumbled for a very long time. We work, you know, having a good CEO and having a CEO that's really focused on the future and figuring out what's the best way that my company could succeed. Lisa Sue knew that AMD couldn't beat Intel head on. There's no way. It's literally David versus Goliath. Okay, well, let's corner this gaming market as much as we can. Let's get our chips into PS5 and Xbox. let's do everything we can to corner that market and they've done extremely well i hope that

answered your question i don't if there's anything no it's uh you touched on a good point there which is you know there's a very bright future with the consoles coming out and sometimes uh like the valuation obviously is pricing and a lot of the future earnings that they're probably going to get uh from those deals and from the boom i'm assuming of or the success of those consoles but we're going to get to the selling point what would have to happen for you to get rid of your amd position oh man uh that's a very good question um and i think a lot of people will agree with this people have been investing for a long time people always think the hardest thing in investing is um is buying the right company i feel like over time that becomes a little bit easier and

what becomes hard is when to sell um and i this can kind of come off as arrogant but when to sell when you're up on a position can be very very difficult uh people always say you know press your winners. So what would make me, I guess, sell AMD? It would have to be continuous products. And when I say continuous, it wouldn't just be one product that Intel comes out with that just obliterates AMD's competitor product to it. It would have to be continuous, probably a yearly product. When I say yearly, I mean like multiple products in a row that beat Intel head-on um intel would have to surprise me in some way and beat out amd in a market that amd is currently is has a stronghold on if intel somehow won the contract for you know the ps5 the ps6

and the xbox series whatever um that's gonna make me that that's really gonna make me sell um because one like i say before and uh this is kind of reverting back to peter lynch know what you own and know why you own it um my why my big why for amd was is gaming and it's always been gaming um and if intel starts beating amd in the gaming space that's really gonna that why is gone now for me and that's what would really start me to uh think about selling my position okay and what was i guess this will be our last question to wrap things up what is one thing you would like to see amd do differently if say you were in charge what's one change you would like to see amd make so one thing that uh i see that amd could improve on would would

obviously without a doubt be the research and development. Um, you know, that's going to take a little hit on their, their balance sheet. Um, but I think that's what you need to do to be a good CEO. You need to realize when almost just kind of like the fed, they realize when the economy is overheated and they take action. Um, I think for example, Tesla has done this brilliantly over the past couple of months. For instance, they just, you know, sold $5 billion worth of stock. Boom, right there. Boom, they have $5 billion. And they raised that in a second. They realized the stock was at $650 and they sold off some shares and got an incredible deal. You know, 2019, the share price of AMD is $20. Right now the share price is $91. Um, I would like to see them raise a little

bit more, more cash, um, and maybe, and, and sacrifice, you know, the meteoric rise of from June, June, 2020 at $56 to, uh, you know, over a close to a hundred percent at gain at $91. I'm fine i'm fine with amd going down 10 from here actually i wish i pray um so that's one one area that they can improve on um is probably figuring out ways in which they can set themselves up better in the future by maybe you know making some financial moves that toward investors which would would make the stock price fall a little bit um yeah it's interesting i i uh it feels like there's a lot of companies that aren't quite exploiting their valuation or using that to their advantage um when they definitely could right now right exactly uh one one instance would

be like zoom um i i i won't buy zoom i i you know it's just out it's outrageous and they you know what zoom should be doing right now they should be buying every single company that they can they need to their moat quote unquote needs to be other companies facebook's moat my opinion facebook's moat is is instagram you know they facebook realized hey we got all this money let's just start buying things and um so yeah i think ironically as much as everyone gives crap to tesla they've been really smart with that and and because when you can just raise five billion dollars in a blink of an eye you know that gives you so much power um i don't think amd can raise five billion dollars in a blink of eye nowhere near like tesla can but um they can definitely

do some some more financial things um to better position themselves yeah it might sacrifice the share price just a little bit, I would think. But as I've seen with AMD and I follow the price pretty well, it really does rubber band. You're going to be hard pressed. I really see it hard pressed seeing AMD in the 60s again, unless something really crazy happens. So a lot of people uh like to hold this stock and are along on the stock and when they see when they see a dip it just gets bought back up um so all right interesting yeah um that's amd and where can listeners find you do you have a or do we already go over this do you have a twitter handle yeah so you can find me on twitter at rebel markets all one word um on there i have a newsletter in my

bio. It's free. Um, my newsletter, I basically just talk about financial education topics, um, things that kind of people just skip over and don't really talk about, um, really basic stuff, almost stuff that you're embarrassed to ask. Um, those are the things that I, that I like to teach like PE ratios, stuff like that, and maybe bring some more complex topics to it. Um, but all in all it's a financial education newsletter um so you can find me those two those two places i also have an instagram at rebel markets where i take my tweets and expound on them a little bit more deeper more in depth um and yeah that's that's where you can find me all right perfect okay we want to remind our listeners that we are not financial advisors anything we say or discuss

here on chit chat money is not formal advice or recommendation thank you guys for listening we'll see you next time Thanks for watching!