Eric Jackson and the Search for the Next 100 Bagger | TCAF 216

Episode Overview

• The episode analyzes the OpenAI leadership crisis, framing it as a major narrative shift for the entire AI investment theme and highlighting the systemic risks posed by the industry's reliance on a single private company.
• Guest Eric Jackson shares his investment philosophy on finding "100-bagger" stocks, using the extreme volatility and eventual turnarounds of companies like Carvana and Opendoor ($OPEN) as case studies.
• The conversation explores the rising influence of social media-driven retail investor movements, noting how corporations are now actively embracing and cultivating this "grassroots mania" to support their stock.
• The hosts delve into Jackson's unique and viral marketing tactics, specifically his daily videos filmed in front of Drake's mansion to promote Opendoor stock to the rapper and the public.

Key Concepts

• OpenAI's Systemic Importance: The discussion centers on how OpenAI, despite being a private company, has become so integral to the AI ecosystem that its internal turmoil creates significant risk for publicly traded tech giants whose revenue forecasts depend on it.
• Hyper-Growth Strategy: The group examines the "growth-at-all-costs" mindset justified by ChatGPT's unprecedented user adoption, which surpassed even TikTok's growth rate, and the competitive pressure to win the AI platform war.
• The "Too Big to Fail" Moat: OpenAI strategically made itself indispensable through widespread partnerships, making its stability crucial for the entire AI industry's foundation.
• Stock Re-rating: A core investment concept discussed is the powerful re-rating that occurs when a company transitions from being a money-loser to a money-maker, forcing a fundamental re-evaluation by investors and short-sellers.
• Short Squeeze Mechanics: The hosts explain how a positive shift in a company's fundamentals can force bearish investors (short-sellers) to buy back shares, creating a technical short squeeze that accelerates a stock rally.
• Turnaround Narratives: The conversation highlights key catalysts in a company's turnaround story, such as the hiring of a high-profile executive from a larger, respected company, which serves as a major vote of confidence.
• The Rise of "Cult Stocks": The group analyzes the phenomenon of "cult stocks" like Opendoor, which are driven by a dedicated, grassroots community of retail investors on social media, often referred to as the "OPEN Army."
• Corporate Embrace of Retail Mania: A notable shift in corporate strategy is observed, where companies with beaten-down stocks now actively encourage and engage with social media-driven investor movements, a stark contrast to the traditional approach of ignoring them.

Quotes

• At 1:22 - "Well, I like to go to Drake's early morning, so I actually prefer it like 7:00 AM, 6:45 AM. And I actually preferred it when it was like darker." - Eric Jackson jokingly references his popular TikTok videos, which are filmed during his morning runs in front of Drake's Toronto mansion.
• At 2:47 - "We're going after hundred-baggers here, Michael. Come on." - Eric Jackson jokingly corrects host Michael Batnick, upping the ante from "ten-baggers" to "hundred-baggers" when discussing his investment style.
• At 3:45 - "Tweet something! Do something! Move the stock price up!" - Eric Jackson describes the frantic messages he receives from followers when a stock he has recommended goes down.
• At 8:31 - "I think this is the week that something materially in the narrative about AI investing has sort of turned, made a left turn." - Josh Brown sets the stage for the main discussion, highlighting the significance of the recent turmoil at OpenAI for the broader market.
• At 9:51 - "It's a wild situation that it's the only one that's not public that's like materially important to all of these public companies' earnings outlooks." - Josh Brown comments on OpenAI's unique and central position within the AI ecosystem, despite it being a private company.
• At 24:25 - "Well the real concern is now you have some of the biggest publicly traded companies in the country where analysts are baking in orders and revenue coming from these OpenAI commitments." - Josh Brown explains the ripple effect of OpenAI's instability on the stock market.
• At 25:25 - "It makes TikTok look slow." - Josh Brown emphasizes the unprecedented speed of ChatGPT's user adoption, providing context for the hyper-growth environment.
• At 25:37 - "They've made themselves too big to fail in AI... nothing can happen at AI without it affecting the whole... foundation of the house that we've built on this theme." - Josh Brown highlights OpenAI's strategic indispensability within the broader tech ecosystem.
• At 26:26 - "Are you taking your foot off the gas when Anthropic is like breathing down your neck and Google's coming at you with Gemini?" - Eric Jackson questions the board's reported desire for a slower, more cautious approach, given the intense competitive landscape.
• At 54:27 - "There's a major re-rating that happens when companies go from money losers to money makers." - Eric Jackson explains the fundamental catalyst for a stock's turnaround, using Carvana as a recent example.
• At 55:30 - "The guy who was the COO at Shopify... a 200 billion dollar legit company... willingly left... to become the CEO of Opendoor, a 3 billion dollar company." - Eric Jackson highlights the hiring of a top executive as a major sign of confidence in Opendoor's future.
• At 57:05 - "With this type of shareholder grassroots mania starting on social media... it's effective, and I feel like companies that have nothing left to lose... are now actively embracing, they're cultivating this." - Josh Brown observes a change in corporate strategy, where companies now encourage social media-driven investor enthusiasm instead of ignoring it.
• At 58:43 - "Is it a meme stock or is it a...?" "It's a cult stock." - Eric Jackson questions the panel on how to classify Opendoor, with Michael Batnick labeling it a "cult stock" due to its dedicated following.
• At 1:03:20 - "You gotta do it like every day until he buys Open stock." - Eric Jackson shares his 16-year-old son's advice for his viral video campaign of standing in front of Drake's house to promote Opendoor.
• At 1:04:59 - "What's going on here? We've been watching you for the last 10 days on the security cameras." - Eric Jackson recounts what Drake's security guard said to him after days of filming videos outside the rapper's mansion.

Takeaways

• A crisis at a single, keystone private company can expose systemic risks across an entire public market sector that has become dependent on it.
• In a competitive, winner-take-all market like AI, an aggressive growth and spending strategy is often necessary to secure market leadership and attract capital.
• To succeed in high-volatility "story stocks," investors must have the conviction and psychological resilience to hold positions through severe drawdowns.
• The transition from unprofitability to profitability is one of the most powerful catalysts for a stock's performance, as it fundamentally changes the investment narrative.
• Look for key "tells" in a company's turnaround story, such as the hiring of a top-tier executive from a well-respected firm, as a signal of internal confidence.
• The power of retail investor communities on social media should not be underestimated, as they can create significant momentum and influence a stock's narrative.
• Companies are increasingly recognizing the value of engaging with and fostering these grassroots investor movements rather than dismissing them.
• A positive change in a company's fundamentals can create a powerful technical tailwind by triggering a short squeeze.
• Unconventional and persistent marketing efforts can be highly effective in building a community and capturing public attention for an investment thesis.