In this episode of the Left Brain Thinking podcast, host Chuck Jaffe interviews Freddie Garcia, Vice President of Investments at Left Brain Wealth Management. The conversation centers on Left Brain’s style‑agnostic, number‑driven investment philosophy and how it applies to the financial sector during and after the COVID‑19 pandemic. Garcia explains why the firm looks beyond headline‑driven “value” narratives and instead seeks companies that have demonstrated strong pandemic‑era growth and possess clear forward‑looking advantages. He highlights two fintech firms—Square (SQ) and PayPal (PYPL)—as prime examples of “growth stocks in a value sector.” The discussion covers their 2020 performance, leadership quality, cash‑deployment strategies, and the expanding cashless‑society market that underpins their growth potential. Garcia argues that both companies complement each other and merit simultaneous ownership, while traditional banks lack the competitive edge and forward‑thinking metrics to justify inclusion. He also outlines specific exit triggers: leadership changes or cash being allocated away from development. The episode concludes with standard disclosures that the content is not personalized investment advice.
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Welcome to Left Brain Thinking, where creative investment ideas meet logical analysis. That's the hallmark of Left Brain Investment Research, where the analysts are looking for growth companies with the potential to double in 2 to 3 years and high-yield bonds with the potential for dramatic price appreciation. You can learn more about the work that they do at leftbrainir.com and on Twitter @leftbrainir. Today we're talking with Freddie Garcia, Vice President of Investments for Left Brain Wealth Management, about growth stocks in a value sector, financial companies that have benefited from the pandemic and then have the potential to keep going once it's over. Freddie Garcia, great to have you back on Left Brain Thinking.
Well, Chuck, thank you for having me again. I always appreciate coming on your show.
Growth stocks in a value sector. You know, there's been a lot of talk about how value has started to make a comeback or might be making a comeback. And at Left Brain, while we talk about you're looking for companies that are growing, it's not that you're wed to a growth style. You're kind of style agnostic. You're number specific and you're driven by the numbers. So we've got a value sector. Some people have said value investing is dead. Some people are saying here it comes, it's about to come back. But for you, it's that value sector, but stocks that are growing within it. So why financials now, and why the right financials are not value and not growth? They're left-brain ideas.
Well, Chuck, again, as I mentioned before, as an advisor, I get to hear from clients directly, and one of the things I always get is the things they hear on the news. And at Left Brain, we always have the philosophy is we never invest based on headlines. Yes. So the conversation I want to have with your viewers, and also that same conversation I have with our investors, is don't go based on headlines and don't go by what you hear in financial media outlets that just tell you, well, invest in value now because it's been beaten down so much and it's time for it to come back. That's not a good enough reason. So when you hear somebody say, all right, look at the banking stocks because the banking stocks, you know, they had a nice little comeback in the month of November and December and their price has beaten up so much that, you know, maybe it's a good value. But when looking at value, you really have to look at what is the real true value. And we see the true value looking at companies that have the continued growth momentum, that can capitalize on the fact that they did so well and can carry that going forward. And there's two stocks in particular that I'm going to say, if you're going to go ahead and look at the financial sector, don't just look at, you know, the banks because they're down. Look at financials that did well in 2020 and should do even better in 2021 because they can carry that momentum going forward. And the two stocks I want to highlight, two companies we like very much, Square and PayPal. So Square, SQ, and PayPal, PYPL, those are two stocks that we were invested in pretty heavily in 2020 that we feel that momentum will continue into 2021. Because again, my theme has always been like, if you like something during the pandemic and post-election, take a look at it again. If it makes sense prior to that, it should continue to make sense going forward.
What we've seen in the pandemic is certain businesses that have really jumped ahead and certain other businesses that have been held back that maybe they'll be coming back at some point. When you're looking at Square and PayPal, you are talking about two companies in a very hot space. So how do you coincide the, hey, we don't want to do what's in the news. We don't necessarily want to be going after what's hot. We want to go after what's next. How do you differentiate what's hot, which is PayPal and Square, from what's next, which is also PayPal and Square?
Well, those two companies have the availability that yes, they were the hot stocks and, you know, finishing off the year very strong with pretty high returns, you know, Square being over 246% year to date and PayPal almost being 100% return year to date. Now that is the hot stock, but the thing we like about these companies when we analyze a company is what can they do next? Both of them have strong leadership, great CEOs on both fronts, and forward thinking as far as what to do with the success they had this year, how to carry that in 2021. They're both developing apps to carry on in this cashless society payment that we've moved to. Both got hit with the pandemic, even Square took a hit, and they still managed to rise above that. So even with taking a hit, imagine as businesses start to reopen next year and the e-commerce platform gets even bigger, what type of impact that will have with Square. If they had to deal with this dilemma last year, imagine going forward next year as everything reopens and more businesses continue to use their platform. Same thing with PayPal. You know, they took all the cash they made and continued to develop new apps to further, you know, again, we're basically going into a cashless society here. And both those two companies are very much leaders in this space, and their market cap is much bigger than the potential that each company has capped yet. So they still have a lot of growth potential because of that, because they're just now touching the surface on this stuff, and the space is getting bigger.
The space is getting bigger, but you also have two companies in that space, two big players in that space. Do you want to own both? Is it a case of pick one for your portfolio, or this is a case of as long as they both have the right metrics, I'm going to own both side by side?
Yeah, I would say both. And again, they are both big players in the space, but both of them are using their cash very effectively. Square deals a lot with the merchant processing. PayPal, again, dealing a lot with cashless and development of more apps in that space. So I would say both complement each other, and we like both, so we're going to stick with both going forward.
In terms of the rest of the space, like we said, it's considered a value area, financials in general. Are there other financials that you just can't get into? The banks, things along those lines, they may be recovering slightly, but they don't have the right metrics.
It's not so much that they don't have the right metrics at times. It's the fact that you take two companies that had some great success, they're going to have a very strong competitive advantage going into next year. You know, the banks, they got beaten up a lot, but they don't have the competitive advantage that Square and PayPal do because again, they get to reimplement all the cash they made last year. So they get to further separate themselves from their competitors. That's why we like those two so much. And that's why I'm very leery of going with the banks because With the banks, it's just a play because their stock is down, but really nothing has changed for them going into 2021 other than that their stock is down, that maybe they'll come back. That's not a good enough reason for us. We want to see what's the forward thinking that's going to give them a competitive advantage.
I know you guys don't put targets on the stocks that you're buying. You're looking to see what's going to happen. But if you had to say, hey, I'm going to be in these stocks, these stocks have the right thing, I will be in these stocks until when? What would it take to make you change your mind about Square and PayPal?
One, if there's a change possibly in the CEOs and leadership, that can change our outlook on the stock because it has a huge factor on what we look at now. Two, if they start deploying their cash in other methods that aren't going back into development to give them that creative advantage. So if we see deployments go elsewhere in something that just doesn't make sense, you know, that can cause us to take a look and say, you know what, maybe it's time to get out of this area.
Freddie, great stuff as always. Thanks so much for taking the time out to join me.
Well, Chuck, thanks for having me.
Left Brain Thinking is a joint production of Left Brain Investment Research and Money Life with Chuck Jaffe. Our conversations are not personalized investment recommendations but are designed to engage your brain. Please do your diligence before making any financial transaction. I'm your host, Chuck Jaffe. You can learn more about my weekday podcast at moneylifeshow.com. Thanks to my guest, Freddy Garcia. Vice President of Investments for Left Brain Wealth Management. Learn more about the firm and its services and all the stocks and bonds they research at leftbrainir.com. They're on Twitter @leftbrainir. Left Brain Thinking is available every Wednesday. Find it and subscribe on your favorite podcast app and plan to put your left brain thinking cap on every week. Until then, stay safe, everybody.
