A Continued Conversation with The Science of Hitting

7investing Lead Advisor Matthew Cochrane was happy to welcome back The Science of Hitting to the podcast for another conversation covering a wide gamut of companies and financial news.     

After writing more than 800 articles on GuruFocus over the last nine years, The Science of Hitting is moving to Substack, where he will post new research ideas, personal portfolio updates, and higher-level thoughts on investment philosophy. He says, "I essentially view this as an opportunity to take the work I've done on Gurufocus over the past decade a step further, to really open up everything about my thoughts and actions as an investor with subscribers."   

When discussing whether he uses complex discount cash flow analyses when valuing stocks, Science of Hitting says he hopes he has found a happy medium between using back of envelope math or financial modeling that employs dozens of unknowable variables. While he uses models to see what earnings and free cash flow might be five years down the road, the bigger rationale for doing it is discovering the business's most significant drivers. For instance, it can help when studying retailers to determine if store expansion or same-store sales growth is more critical to the company's future.  

The two look at the market, discussing whether re-opening economy plays are already getting ahead of themselves. Matthew notes that the U.S. Global Jets ETF (NYSE:JETS) is only slightly off its pre-pandemic highs and the Invesco Dynamic Leisure and Entertainment ETF (NYSE:PEJ) is slightly above its pre-pandemic price. Science of Hitting shares that he sold longtime position Booking Holdings (NASDAQ:BKNG) based on valuation concerns. He noted Booking's stock price was about $2,000 heading into the pandemic before getting cut in half, but that it had now recovered to about $2,400. That's 20% above where it traded pre-pandemic despite management cautioning it might take years before its business fully recovers from COVID's impact.   

While discussing economic re-opening plays, the discussion turns to Vail Resorts (NYSE:MTN), the owner-operator of the majority of the most popular ski resorts in the U.S. and around the world. Vail recently cut its season pass prices by 20%. With the number of active skiers seemingly in secular decline, many wonder if this is a desperate attempt to lure new skiers to its resorts or leverage its scale and competitive positioning to kick its competitors while down.  
Science of Hitting also gave his take on Spotify's (NYSE:SPOT) recent acquisition of Locker Room, a live audio app used for fans and insiders to talk about sports. Overall, it was a relatively small sum Spotify spent to secure the deal while it has the potential to now participate in a massive step of audio's evolution.