Transcript of Ruin the Bell Curve with Tony Sagami

To view our most recent Wealth & Wisdom video, click here. For the transcript, edited for clarity, read on ...

Kenny Polcari: Welcome to our latest edition of Wealth and Wisdom, I am your host, Kenny Polcari. Today, we're going to talk to one of Weiss' greatest editors. His name is Tony Sagami. You probably don't know him, but if you don't, you're going to learn to love him after this conversation.

Tony is one of the early pioneers in the application of technical quantitative analysis at Weiss Ratings. And he's the editor of the Weiss Ultimate Portfolio, as well as Disruptors & Dominators and the stock and ETF options trading portfolio. Tony, tell me the name of the option one?

Tony Sagami: Stock Options Hotline. That's my most speculative service designed for big, grand-slam home runs, options but extremely rewarding if you hit them right.

Kenny: And the Weiss Ultimate Portfolio is based on much more of a long-term portfolio for investors who are looking to establish a long-term plan. It's not necessarily trying to identify the hottest, latest stock; it's much more of a long-term portfolio.

Tony: Yeah. It's really geared more toward retirement accounts, IRA (individual retirement account).

Kenny: And then we have Disruptors & Dominators, which is such a great editorial piece because it talks about exactly that — disruptor names and dominators in the space. So, Tony, tell us just a little bit about that, and explain to the listeners why this is such an important piece.

Tony: Yeah. Investing is a lot about emotion, as well as making money. You have to be able to sleep well at night, especially during trying times like this. The best way to keep a long-term plan in place is to invest in a combination of dominant, profitable blue-chip companies, the dominators of their industry. The companies that make money year in, year out, that aren't going anywhere. On the other hand, you also want to go for some big gusto growth. And those are the disruptors, the ones with exciting new technology or new proprietary business systems that really help them grow and disrupt their industry and make tons of money. So, I take a barbell of both, some disruptors and some dominators.

Kenny: I think that makes perfect sense. But let me ask you a question: Are the disruptor names that you're talking about all in that Cathie Wood universe?

Tony: No way. Let me give you an example. There's a company called Copart (CPRT), and they've put in junkyard inventory on a national database. There's nothing high-tech about junkyards, but their application of this new, cloud-based inventory of all the junkyards in the U.S. — not all, but many — is really revolutionary. And it's made it easier to get used parts, and it's also made the value of used cars go up because people are ready to buy parts when they can get their hands on them.

Kenny: Tell me what's the symbol for that again?

Tony: CPRT, Copart.

Kenny: I'm looking it up right now because I've never heard of it. So, I just want to take a look at it really quick on the chart. Wow, it's a $117 stock.

Not bad for a junkyard stock. And it has had an interesting ride, I will say. But since the market has been under pressure this year, the stock is down about 28% off its high back in November. So, it has actually held up pretty well, considering the difficulty that the market has been through. What an amazing idea, Copart. I had no idea that stock even existed.

Tony: Yeah. You don't have to be in a whizbang tech stock to be a disruptor. Costco (COST) was a disruptor, wasn't it?

Kenny: Amazon (AMZN) was a disruptor.

Tony: FedEx (FDX). If I really do my job right, today's disruptors become tomorrow's dominators.

Kenny: Amazon, who was a disruptor 15 years ago, is now the blue chip in that space. Today it actually split 20-for-1, and it's a $127 stock now, so it's much more affordable for people.

Tony: Yes, but that's just an example of how you don't have to be a whizbang tech stock to be a disruptive, high-growth stock. Now, some of them happen to be like that. For example, we were talking about cybersecurity a little earlier. Those are very disruptive stocks, but also very volatile. And so, it's an area that we should take a look at. But you don't have to invest, there's a lot of ETFs that invest in cybersecurity stocks, too.

Kenny: Give me an example, an ETF like CIBR, which is the First Trust NASDAQ Cybersecurity ETF?

Tony: That's the biggest one, with almost six billion in assets. And that's really important when you're looking at more thinly traded tech stocks, but this one owns a lot of cybersecurity stocks that we talk about all the time. But the problem with the big basket of cybersecurity stocks is. In the old days, cybersecurity was really focused on protecting the servers that were domiciled in the home offices, that's where cybersecurity threats used to be. But now, since COVID-19 and working at home and the home offices, now we have millions of new entry points for cyber scumbags to get in. It's your laptop at home or your company smartphone that they gave you. So, the cyber scumbags are starting to get in there. When you're looking at cybersecurity today, the cloud-based cybersecurity is really the sweet spot of the cybersecurity industry.

Kenny: When we talk about the cybersecurity ETFs, CIBR for example, you have names like Palo Alto Networks (PANW), CrowdStrike Holdings (CRWD), Cisco Systems (CSCO), VMware (VMW), Booz Allen Hamilton (BAH). These are all names within that ETF, right?

Tony: Yes. Everyone you named, except one, is concentrated on the home office server security.

Kenny: Which is very important.

Tony: Absolutely. But I think it's not the best part of the cybersecurity food chain to invest in. But that's the purpose of ETFs, to give you a wide array of different options.

Kind of like the mutual funds of the old days.

Kenny: Dominators & Disruptors in this case is going to identify specific individual names within the space. You could play cybersecurity using an ETF like HACK or CIBR, but if you really want the bang for your buck, in an editorial piece like Disruptors & Dominators, you identify within that space, names that individuals should be looking at.

Tony: Yeah. And this is a little off target, but still applicable to ETFs: Every once in a while, once every three, four, five years, ETFs pay out big capital gain distributions.

If there's a lot of redemptions, they have to start selling stock, and that triggers capital gains. You didn't sell, but the people inside the ETF did, and so you get hit with the capital gain. That's why I like the control that the individual stocks give me on top of getting into the best part of the food chain of every particular sector.

Kenny: And Dominators & Disruptors identifies the parts that you should be in, the dominators in the space and the companies that are coming up to disrupt the space.

Tony: Yeah. And maybe it's me, individual stocks are more fun.

Kenny: I agree with you. How long has Dominators & Disruptors been alive?

Tony: Oh gosh, since 2007 or '08.

Kenny: And it was your baby? You're the one that brought this idea to the Weiss Ratings?

Tony: I was really looking for a way to combine blue chips with high-growth stocks in a coherent manner. In the old days, if you wanted growth and safety, it used to be a lot of those growth income funds, equity income funds. And those are really high-dividend stocks, but they really didn't capture the growth that I wanted. So instead of going with some hybrid, boring dividend stock, I wanted the big, high-growth disruptors along with the safety of blue-chip disruptors. That's why I proposed that to Martin and he said, "Hey, that's a great idea. Let's do it."

Kenny: Just to be clear, there is room for all of this in the investing world space. There are clients and subscribers who want the safety of high-dividend, big market-cap, very stable names, and other subscribers who want the bang for their buck. They're looking for the next big one, and they want it to be identified by individual names, versus an ETF to your point, because they have more control.

Tony: Yeah. My experience and education are geared toward tech stocks. That's what I know the best and I'm most comfortable with. But you know, talking about 2001/2002 or the 2008/2009 financial crisis, the people that got nothing but tech stocks got hammered so bad, it scared them out of the stock market forever. Everybody loves volatility to the upside.

Nobody likes volatility to the downside. And that's a problem with the pure tech portfolio, your downside of volatility is really painful.

Kenny: If people that play in the tech space don't understand that by now, they need to do some homework because with that risk comes reward.

Tony: Just like Mike Tyson said, "Everybody has a plan until they get punched in the face."

Kenny: And the tech names have gotten punched in the face recently, for sure.

Tony: And even maybe a little lower, below the belt.

Kenny: Tony, I love you. Year to date, NASDAQ is down 22% — by far the worst performer out of all the indexes. Right behind that would be the Russell, down 16%. That speaks directly to the volatility in the tech space, but also in the disruptor tech space because to your point, the disruptors are the ones that have all the risk, but they also have so much of the reward.

Tony: That's true, those dominators are really providing the cushion. When you talk about dominators, it doesn't have to be boring things like General Electric (GE); there's a lot of dominators that are doing fantastically well despite the market this year. Albemarle (ALB), the largest lithium producer in the world; Allegheny Technologies (ATI), the largest titanium producer in the world; Cameco (CCJ), the largest uranium producer in the world.

Those stocks are up, not down. They're dominators, and they're doing fantastic. It doesn't have to be a boring blue chip. We've purposely overweighted with hard assets and natural resources, which are doing fantastic in this inflationary environment that we're in. Dominators are not boring stocks, and they can be extremely profitable.

Kenny: If someone wants to learn more about Disruptors & Dominators, they can find it on the Weiss Ratings website, They can certainly subscribe and learn more about your insight, which I think is amazing because I like your style, I like your presentation, so it always makes for an interesting read.

Tony: Disruptors & Dominators is our low-priced entry service, it's less than $100. Give it a try, it comes with a money-back guarantee. If for any reason you don't like it, you get a full refund, no questions asked. But I think you'll be very impressed with the results. It's done pretty darn well …

Kenny: I have to echo your comments. I think anyone who subscribes to Disruptors & Dominators will be more than pleasantly surprised. Like I said, "A," it's an interesting read, "B," you identify names that are changing the world, and people who want that exposure need this service.

Kenny: Anyway, Tony, thanks so much for your time. It's been great talking to you. I look forward to doing this again with you, in probably the next month or so, because I like to circle back around with you and talk about names that you've identified and chosen over the next month, and how they've performed. And like I said, people should take a look and they'll see.

Tony: Let's do it again. Thanks, Kenny.

Kenny: Thanks so much.

Until next time,

The Weiss Ratings Team

About the Editor

A professional trader since 1981, Kenny went from intern to floor trader to governor at the NYSE. He ran a division of a major Wall Street bank and built the U.S. equities business at one of the world’s largest broker-dealers. Today he shares his four-plus decades of financial acumen with Weiss members via his Wealth & Wisdom service.

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