The Best One Yet - “Cloud computing is the new oil” — Kraft-Heinz 70% stock drop. Tesla’s “buy low, sell high”. Microsoft vs. Amazon.

Episode Date: February 14, 2020

Fresh after Tesla shares hit their all-time high, the company has a surprise: It’s selling 2.6M fresh shares to raise $2B in fresh cash. Kraft Heinz shares fell 8% after the 150-year-old pantry icon showed it has no turnaround plan -- it just wants more processed foods. And the epic $10B JEDI deal between Microsoft and the Pentagon is frozen (and the real winner could be Amazon). Cloud computing is the new oil.Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. And this is Snacks Daily. It is Friday, February 14th, Jack. I woke up this morning with the glow that you only get before a three-day weekend. You get Rice Krispies treats across your face because it's Valentine's Day. It's a good feeling for everyone. Abe Lincoln and George Washington are stoked about this three-day weekend.

This is the best Snacks Daily we've ever done before a three-day weekend. Our first story is Kraft Heinz. The stock dropped 8% because this is its vision for the future of food. Processed cheese, anti-organic, 60 ingredient, food staples. You stick on the shelf and you don't have to eat them for three years because they're still good. That does not sound on trend, Kraft Heinz. It really doesn't. Second story, Jack, what do we got?

You ever heard of the expression, buy low, sell high? Everyone's got an uncle who when they see over the holidays is like, remember, buy low, sell high. Guess what? Tesla is doing that right now with its own stock. $2 billion of it. Our third and final story, the Jedi defense contract between Microsoft and the Pentagon has a great name, Jedi. It's also worth like $10 billion. And it just got frozen by a judge because Amazon thinks it should have won, not Microsoft. But before we jump into all that,

Jack and I want to talk about a little bit of a Valentine's Day hack we've come across. Well, but before you get into that, don't you have something you want to say, Nick? I think it's a merry V-Day to Molly. Alexandra, beautiful wife. Happy Valentine's Day. Can't wait to see it tonight. Now, what Jack and I have noticed is that there is an unknown dating opportunity, incredible event where you should bring everyone you love. We're talking about the Westminster Dog Show, or is it Westminster? Either way, it just sounds fancy. This is in New York City, Madison Square Garden.

It's 20,000 people watching like 300 dogs and their crazy dog owners. This is where you prepare your dog to do things that make it look nothing like a dog, essentially. The winner gets a blue ribbon, I think, and the winner is the one whose dog gallops, and prances across the stage as elegantly as like a human being. Best in show goes to the dog who doesn't poop on stage, and the winner this year, a poodle. Yes, definitely. The winner was a poodle named Siba.

Congratulations. I think this is the first poodle since, like, the 60s. It's the second longest continually held sporting event in the country, and it's the kind of place you should go with someone you love. Trivia question. What's the first longest continuously held sporting event in the country? No, it is not a football game played between. between Bucknell and Lehigh every year.

Is it WrestleMania? It's not WrestleMania. We're going with the Kentucky Derby. Kentucky Derby is the number one. Snackers, let's hit our three stories. You're tuned in the snacks daily. We spoke to the lawyers and we got to get something legal out the way. It snacks about to hear ain't food.

It's air candy. They don't reflect the views of the Robin Hood family. It's all informational just so. We're not recommending any securities. Nope. It's not a research report or investment advice. Not an offer or sale of a security Right

Snacks is digestible Business news for you Robberhood Financial LLC Member Fenra Slash SIPC For our first story Tesla decided

Its stock is so good It's time to sell some of it And take home You know, $2 billion of winnings Companies can buy and sell stock too So Tesla's taking some gains right now Now snackers you may have noticed That Tesla stock is a cool

Like $800 these days Now that's down from $900 two weeks ago, but the stock was $180 in May. We repeat, Tesla stock was $180 back in May of 2019. So clearly, investors are going crazy for Tesla stock, but Tesla has not benefited from this insane rise in the stock price. And that's because when a company first issue stock, like with an IPO, it gets a return in cash by issuing its shares. That's when it gets some benefit. But when stocks just trade on the secondary market, the company isn't actually getting any money when people buy Tesla stock.

Until now. Tesla announced yesterday it's selling 2.6 million brand spanking new shares of Tesla for $767 each. That means $2 billion in cash coming into Tesla's pocket. And it's not just going into Elon's pockets. They're going to use this money because they've got to build out, you know, a new German gigafactory, which do you have a status update check? There's a lot of serious Tesla fans out there. If you look on Twitter, you can see pictures of the forest just outside of Berlin that they're

cutting down trees to prepare for this gigafactory. They literally are ironically using gas-powered vehicles to cut down these trees, but they need to put the trees somewhere and pay for that. So Tesla needs some cash. Investors want Tesla stock. Tesla is selling stock for cash to investors. Everybody wins. Just like how a government can print new money,

companies can print new shares nice and shiny. Mostly, though, we hear about companies buying back their own shares because they're swimming in profits. When Apple buys back a billion dollars, of its own stock, the price of the remaining shares tends to fall. This time, Tesla is selling its own stock because it printed it right off the printing press. So you'd think that the remaining Tesla stock should probably fall because now it's all diluted. Right. Every Tesla shareholder owns a little bit less of Tesla than they did before this stock issuance. But here's the weird

think, Snackers, Tesla stock didn't fall yesterday. It actually rose 5%. Sometimes you can't explain stock movements, especially with Tesla. This is like defying economic gravity. So Jack, what's the takeaway for our buddies over Tesla? Like 99.9% of stock sales are secondary, but this one is primary. Snackers, if you open up a trading app and buy shares of TSLA, Tesla, someone random is probably selling them to you. Probably like our buddy Timmy. He might be the one selling you the Tesla stock. Honestly, it's probably Timmy. This time, though, you are buying stock directly from Tesla if you bought the 2.6 million shares that were sold yesterday. So money from retail investors like you and us, it's going from your pockets straight into Tesla's bank account directly. This is a primary stock

sale with Tesla direct. Not a secondary stock sale with our buddy, Timmy. For our second story, Kraft Heinz just plummeted 8% because it's anti-food innovation. This company is doubling down on the process stuff. 150 years old, these are the legends behind Philadelphia cream cheese, Oscar Meyer hot docks, planters, like random arbitrary nuts that are kind of, no one likes Brazil nuts. Well, they're also behind Kraft and Heinz. And they're based in Pittsburgh, PA. Also, we should point out the coolest thing about Kraft Heinz.

Ed Shearin has a Heinz tattoo on his forearm. I fact-checked this one because I didn't believe it, but it's true. The only explanation I can think of, he's a redhead. Ketchup's red. Snackers, we noticed their earnings report basically served up in all-you-can-eat buffet of really bad food news. In the past, sales fell by 5% in 2019. to $6.5 billion.

For the future, they let us know that they're expecting less sales than expected for the next nine months. Oh, by the way, our Maxwell House coffee brand, we wrote that down by like a couple hundred mill because it's not selling anything. Jack, I think we're in a position now where can we pile on a little more bad news for Kraft Hines? Do they sell doggy bags for this bad news? Second serving of context of bad news for Craft Hints.

Jack, take it away. Kraft Hines' stock is down 70% over the last three years. FYI, they merged Kraft and Heinz a few years ago. Ever since then, it's been like not the most fun relationship. Oh, by the way, by the way, I'm like stacking on PSs onto this story. One year ago, Kraft Heinz wrote down the value of its food brands by $15 billion. Jack, can I borrow a continent and throw on another PPS here? Their old school brands are not attracting buyers. They're repelling them. I think they'd be better off selling Velvita's products if the label didn't even say velvita. Now here's the thing, Snackers. The core products that Kraft Heinz pumps out,

they tell the story of its decline. There's simply lower demand from consumers for its favorite items. There is lower cold-cut demand in the U.S. And that hurts Oscar Meyer Foods. There is lower cheese demand in the U.S. Craft single sales suffer. But there is higher demand for fancy coffee. Unfortunately, they don't sell fancy coffee. They sell Maxwell House. Which is kind of like the Velvita of coffee. So Jack, what's the takeaway for our buddies over at Kraft Hines? Kraft Hines is failing because it's pursuing the opposite strategy of its peers. Snackers, big food giants, they know they can't innovate, so they acquire cooler startups instead. Check out Kellogg, owner of the RX bar, which it acquired a couple years ago.

That's now the fastest growing protein bar in the United States. Warning to the vegans out there, it has egg whites. It has egg whites. General Mills bought and he's organic. And then it acquired epic snack bars made of like free range salmon. Yeah, the bison like are in and mixed with the salmon. It's kind of creepy, but it's kind of cool. And look at Hershey's. They acquired Skinny Pop, which is like 100 calories per bag of popcorn, and they're getting into savory health snacks. Snackers, dirty secret here, by the way. When Jack is feeling hungry, I throw popcorn at him because it's his favorite savory snack while I'm enjoying Skippies. I'm kind of like a dog fetching a popcorn kernel. I really like an indulgent peanut butter.

So Kraft Hines is focused only on cost cutting. It's doubling down on its core thing, ketchup. And they barely even change the packaging. For our third and final story, a federal judge just froze Microsoft's sweet $10 billion Jedi deal with the Pentagon. And this is a big win for Amazon. But Microsoft stock, the loser here, it lost $17 billion in value yesterday on the news. It lost more than one lift in value on this one headline.

It took some paper. It was a single lift that was lost yesterday from Microsoft. But this story is all about checks and balances. Let's go back to Constitution 101. Right. The Pentagon, aka the Department of Defense, aka the DOD, needs giant amounts of data to get crunched every day, aka data crunching. So they asked the top cloud computing companies to offer their best deal. And Microsoft ended up winning this deal, a $10 billion deal, it'll get paid over 10 years. Fantastic. Congrats. One of the biggest deals in cloud computing history. Now, the government gets to use Microsoft's fancy servers to crunch data while they're, like, humming along at fast speeds, heating up. And we're talking about, like, military defense data. This stuff's pretty critical, pretty sensitive. That's why Microsoft has guards, cameras, prison walls. It's like a nuclear launch site level of security on this thing.

By the way, Microsoft is keeping their servers in the ocean, not for security reasons, but just because it, like, kind of cools them down. Not all of their servers. Some of their servers are in the ocean. But, you know, when your computer, sitting on your lap and it's like, and then it's like it's really hot. Right. Dipping that thing in the ocean is perfect. These servers could get like a Netflix show deal. Their life is so cool in the ocean.

So this deal that Microsoft won, it's like the F-35 fighter jet deal that a defense company would win, but for tech, and it's much more profitable. But here's the funny thing, Snackers. In December, Amazon sued the Trump administration after this deal first went through. Amazon was the clear favorite,

it, but shockingly lost the deal to Microsoft. And what Amazon says is that Trump is believed to have ordered Amazon to not win the deal because Trump's not a big fan of Jeff Bezos, CEO of Amazon. Now, Bezos is the owner of the Washington Post. And the Washington Post reports on Donald Trump. Now, here is the news from yesterday. A federal judge has halted implementation of Microsoft's deal with the DoD until she can make a final decision on Amazon's lawsuit. This would be a huge blow to Microsoft if it loses the deal, since Amazon's,

is number one in cloud. So Jack, what's the takeaway for our buddies over at Microsoft? Cloud computing is the new oil. The entire economy runs on cloud computing. Snackers, it is digital oil. The kind of thing that was like at the plot of the Matrix. I'm not a big Keanu Reeves fan. I can't even go with that one.

No one really even knows what they were fighting about in the Matrix either. But Snackers, in the pre-internet economy, like in the 90s and the late 80s when Nick and I were born, everything bought and sold required oil in sales. some way. You got to get from A to point B and you get there with some oil. Yeah, gasoline is probably like what fueled that thing to get into your hands. But today, businesses are going from digital point A to digital point B with computers and apps and cloud computing behind all that. They don't store their own data. They don't have their own servers. Computing and data are fed through the cloud and it's mainly done by just a few big companies. Amazon is number one and

its cloud revenues represent just 12% of Amazon's overall revenues, but 63% of Amazon's profits are from its cloud business. And the other big cloud leaders, they're Microsoft, Oracle, Alibaba, and IBM. Cloud computing is the new oil of this economy. And that's why Microsoft just lost a lift. Jack, can you whip up the takeaways for us before the three-day weekend? Tesla needs cash. Investors want Tesla, so it sold $2 billion of Tesla shares.

It's a primary sale of stock, so it goes straight to Tesla's wallet. Not a secondary sale like that Gucci bag you found on eBay for $3,000. Not like that at all. Second Story Jack, second takeaway, Jack. Kraft Heinz is struggling to sell its classic American brands, so its profit is suffering. Honestly, crap, just do what your peers did and go buy a chia fruit, cashew snack bar company already. Please, just do it. Third and final story, a federal judge just pushed pause on Microsoft's $10 billion Jedi deal with the Pentagon.

Cloud computing. It's the new oil of this economy. Now, Snackers, time for a snack fact from a snacker who tweets at us a lot. And we're going with the combo here from Sam from North Hollywood, California. A big fan of Snackers who tweeted us a lot, by the way. Yeah, relentlessness is a great trait. Today is Valentine's Day. Men spend on average $338 on a Valentine's Day gift compared to women who say they spend on average $64.

It's the thought that counts? I know, I think that's worth making clear to people. I think it's the money that counts. We may want to even this out. Also, Sam pointed out that people spend on average $96 on Valentine's Day gifts for their cats, but $81 for their dogs. Again, what's going on here? Cats are so needy.

Pet injustice. By the way, Snackers, we should say happy Valentine's Day to Allison McElroy from Chase. Allison, Chase wanted us to let you know. Couples that snack together stay together, that's for sure. Snackers, have a fantastic three-day weekend. Snackers, it's a long weekend. you'll have plenty of time to recommend Snacks Daily to your buddies. This is the only way that we grow.

It's the primary way that we grow is when you tell your friends. I think, Jack, we can point out, Snacks Daily is a great free Valentine's Day gift. Boom. By the way, this is Nick, and I own shares of Alibaba and Jack owns shares of Amazon. The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robin Hood Markets, Inc., or any of its subsidiaries or affiliates. The podcast is for informational purposes only

and is not intended to serve as a recommendation to buy or sell any security and is not an offer or sale of a security. The podcast is also not a research report and is not intended to serve as the basis of any investment decision. Robin Hood Financial LLC, member FINRA, SIPC.