'Meme stocks' will be losers in the end: advisor

Gerber Kawasaki's Ross Gerber tells Reuters' Fred Katayama investors are playing a game of "musical chairs" in trading meme stocks like GameStop and Koss.

Video Transcript

FRED KATAYAMA: The Dow rising in record territory Wednesday, but tech stocks weighing on the NASDAQ after its huge advance yesterday. Let's get some tips on playing this choppy market from Ross Gerber of Gerber Kawasaki in Santa Monica, California. Welcome back, and good afternoon to you, Ross.

ROSS GERBER: Thanks. Thanks for having me.

FRED KATAYAMA: So we've got tech stocks giving back some of their earlier gains. There are concerns about yields among investors. But are-- have tech stocks, have the valuations adjusted to a point where you see a lot of good deals worth picking up on these dips?

ROSS GERBER: I mean, I think there's opportunities in technology. I think, you know, the market looks more interesting to me than it did at its full valuation on the tech side. But really, I think, for a lot of investors, and what we're doing is really making sure that we have more balance in our overall approach in our portfolio, as well, because as we move forward and the way the economy is going to grow, a lot of the names that worked over the last year or two really aren't as attractive to us moving forward. Not that they're not doing well or whatever, but based off how far their valuations have risen relative to kind of core economic type businesses, it just seems like this rotation, it makes a lot of sense. And that's what we're continuing to see.

FRED KATAYAMA: So you know, some of the investors, I guess, are betting that that stimulus money, the $1,400 checks, will go into stocks, especially into these meme stocks. And so we saw costs, for example, double intraday today. It's still up around 60% right now, GameStop. AMC up sharply, as well. What do you make of this meme stock trade, and the belief that some of that money is going to make its way into stocks in general?

ROSS GERBER: Well, first of all, I do think some of the money will make its way into the stock market. A lot of people have a lot of different feelings about the stimulus. I think limiting the income level of who's receiving the stimulus at the last minute made sense. But to think a family making $120,000 a year is getting thousands of dollars in stimulus, and nobody in that family, let's say, has lost their job, where will that money go? And it will go into investments and save-- and spending, I hope, too. So it's definitely a stimulus package. It will stimulate the economy. It's good for stocks. And we're bullish on it.

As far as the meme stocks, I think that's more a byproduct of some of the flaws we have in the stock market and the manipulation that's going on on social media that's creating, you know, in some people's minds, opportunities, which really are just, you know, basically two different groups of people, one's making money and the other's losing money. So for every winner, there's a loser in these stocks. But in the end, none of these companies are good, so they'll all be losers in the end. So it's really kind of a game of musical chairs. And if the kids want to play musical chairs, I say let them play.

FRED KATAYAMA: All right. Now, some of those guys who are playing musical chairs might be interested in Roblox, only because it's an online gaming company, whereas GameStop is a game retailer. They jumped-- the shares jumped 43% at the pop on their debut today. I know you're hot on the gaming sector with Activision and EA. What do you make of Roblox's prospects, this online--

ROSS GERBER: Well, you know, Roblox is a popular platform for kids, and it's a really cool platform. It's not my favorite one because I think most of the games kind of suck, but you know, because they're made by kids, so it's kind of-- you know, I get it. It's-- you know, I think their business is doing well. I think it was valued at 7 billion last year. I value it closer to 10, maybe 12 billion. It's trading at 60 billion, I think, or some crazy number right now. So once again, if you want to play 60 times sales for a business, I say good on you. But it's not for me.

But I think what Roblox is is-- as a company is a very successful company to offset to what GameStop isn't, which is really the Blockbuster of the gaming industry. And so I think, you know, as an investor in gaming, if the Roblox valuation is so high, boy, Activision seems very, very cheap relative to some of these things. And Activision actually makes a lot of money on selling a lot of games which kids play, as well. So I'm very bullish on the video game sector. I think Roblox is a good company, and hopefully it'll go down substantially and I can buy it sometime.

FRED KATAYAMA: That comparison you made to, I guess, Blockbuster Video-- sorry, I was thinking about that.

ROSS GERBER: It is. You know, it's really amazing.

FRED KATAYAMA: All right. Now, your firm just announced plans to begin buying cryptocurrency on behalf of clients who want them. You know, a lot of people compare it to gold. Then again, it's volatile. Where does it belong in a person's portfolio, from your standpoint?

ROSS GERBER: Well, we look at it like a tech stock. So although there's a lot of comparisons to gold, and I think your point is valid, and I make this point, too, you know, gold was a volatile asset in 5000 BC, so you know, this is 5000 BC for crypto. So you know, if you go ahead forward 5,000 years, crypto might be really-- a really valuable asset. And so we think that investors should have exposure to it.

You can argue all the different, you know, arguments, but I think in the end, it's a tech-- it's a technology, and it's like a tech stock. And having a 2% position, just like a 2% position in Nvidia or Apple, makes sense. It just makes sense for investors. We get a-- we're having a tremendous amount of our clients wanting to purchase Bitcoin, but they are not comfortable doing it on their own. So we've decided to build a program for our clients that will be safe and controlled in a way that-- and using a very well-established custodian, Gemini, and add this diversification to our portfolios.

FRED KATAYAMA: All right. A little bit of handholding. Thanks a lot, Ross. Appreciate it.

Our thanks to Ross Gerber of Gerber Kawasaki. I'm Fred Katayama in New York. This is Reuters.