Are You Worried Though?, Doomed Automakers, SEDG Earnings, Defensive AI, And Much More

Here’s the transcript from this week’s live Q&A chat.

Q. As you noted in your NYC trip write up, it does seem that everyone is very bullish. I agree with the sentiment in the article and your feelings from the trip to NYC. I saw recently that put options on the indices are the cheapest they’ve been in an extended period of time. All of this is not making me feel very optimistic near term for the markets. Outside of looking at any pullbacks in our names as a buying opportunity, is there anything else we can/should be doing? Or just riding all of our longs?

A. It’s good to trim and raise cash while you can and not when you might have to later. You’ve seen me send out a couple of Trade Alerts in the last two weeks about having done some trimming in the hedge fund and personal account. You can also buy a few puts on the indices or names like GM and COIN but it’s hard to time puts and to catch the downdraft.

Q. In general, history tells us that Aug and Sep are 2 of the absolutely worst months for stocks. With the amazing run up and rally we have had this year esp. in Tech and AI-related stocks, what is the forecast and game plan for Aug and Sep? Do you expect they will produce buying opportunities? At what point would you buy more of any of your picks? Any new picks for the back half of 2023 that we should look for in these 2 months?

A. I think the markets could pull back 5-10% and stay down there for a while, months at least. On the other hand, I do think there will be some great buying opportunities in individual stocks in the next few weeks if the markets do sell off. I’ll do a Where-I’d-Buy-More matrix in the next few days. We’ll have to see what pitches the markets throw at us when we get them.

Q. Big Drop — we buying anything today?

A. Not much other than a small nibble on SEDG in the hedge fund. Somewhat concerting that there’s quite a few questions about whether we should be buying and almost no fear in the Trading With Cody chat room today.

Q. Any buys?

A. Another one.

Q. Any buy list if market sinks further?

A. That’s another one.

Q. Ugly market today obviously with Credit downgrade out of the blue. I guess the Aug-Sept selloff is upon us. How low will it go?

A. Not sure and I think it might just churn lower for a few weeks or months even. There will be some great buying opportunities in individual names along the way though!

Q. I am worried….just didn’t say so. it’s been many years in a row that August/sept. were bad.

A. My oldest daughter, Lyncoln, likes to ask “Are you though?” whenever we say just about anything about what we’re doing at our house right now. So… Are you though?

Subscriber reply: Well I am 20% in cash, and have lots of “safer” income type of investments or more conservative ETF”s. I own a lot of stocks so it’s hard to me to really trim that fast as its hard to choose. It’s a weakness of my port. SO my feeling was I would rather try to hold tight and add on weakness, than try to time sells, and be perfect getting back in. Don’t know it that will work.

A. Be careful, don’t be greedy, be cool.

Q. Just very generally, re TSLA and the move in electric cars, I believe in the thesis that this is a growth industry, but am always surprised by the hesitance of my friends around it, and so many still questioning climate change or that the EV market is a fad.

A. Whether climate change is manmade or not, the amount of particles and pollution from diesel and gas cars and trucks running around any urban neighborhood is killing people and causing lung and health issues for people who are constantly exposed to it. EVs solve that if nothing else. Also, as I’ve said since I first bought and drove my Tesla Model 3 back in 2019, the Tesla product is soooo much better than any other car I’d ever been in that calling it a fad would be like calling the iPhone a fad when it came out. The Cybertruck will probably be the best selling automobile in history in ten years. Rivians are amazing too. Most Ram, Chevy and Ford automobiles, well, suck in many ways. Their software is buggy, things are never laid out right, too many buttons and knobs and panels and doohickies everywhere, etc.

Q. Twitter has been a bit of a disaster since Elon took over. Any concern that Elon is distracted and that could impact the growth of TSLA?

A. Not really. I wish he’d quit tweeting though.

Q. Could you think of any major auto OEM disappearing in 5-10 years if they can’t get any EV made profitably? Ford seems to struggle with their EV. ICE cars are making legacy OEMs most of their money now, but how do you think this plays out as ICE autos are phased out?

A. I think half of the legacy automakers will go bankrupt in the next five to ten years. Ford, and GM are both in trouble as they spend so much money just trying to make a decent EV while Tesla is growing, innovating and creating new exciting form factors (the Cybertruck). By the time they are trying to scale up their EV factories, nobody’s going to want their bad software cars. I’m short both F and GM right now.

Q. Adding to BITO below 15 is that correct?

A. We didn’t yet.

Q. Intel has been a big position for us for a while now. Feels like they are starting to turn the corner. The CEO went on TV and alluded to some positive developments that will be revealed later in the year. What were your thoughts on the earnings report? Where would you rank this one?

A. I didn’t love the quarter or the CEO’s commentary but they weren’t bad. I think Intel will benefit from The AI Revolution, but the company has to continue to innovate, execute and roll out those new fabs in order to really win big in AI. We trimmed some INTC after the earnings report and are sitting tight with it for now.

Q. There has been a lot of talk about super conductors which are supposedly a game changer. Are there any stocks to get ahead of the revolution?

A. Room temperature semis would change the world. Not sure that the current buzz is anything real yet. Still keeping an eye on it though.

Q. UBER earnings coming out before the bell on Tuesday morning. This stock has had a massive run up and a lot of analysts are bullish on this one. Can you please give your thoughts on the UBER earnings and how they are executing from your standpoint?

A. Amazing execution and continued market share taking. Ridesharing is doing great and nobody uses Lyft anymore like they do UBER as Uber’s critical mass of drivers helps it be more efficient and more readily available at all times. Food delivery is doing well and they are probably taking share from Doordash and others. Freight is not doing well but that whole industry is struggling right now. I think its competitors from Doordash to Lyft to Yellow (declared bankruptcy this week) are in trouble and UBER’s set up to take more market share in coming quarters.

Q. UBER has had a great run, but now it is down 5%. At what point would you buy more?

A. Maybe closer to $40 I’d look to buy some of the shares we trimmed back.

Q. I’m interested in your thoughts on the RIVN showroom. Bryce mentioned that you both thought the RIVN truck was a fantastic product. Does this make you any more bullish on the name? I know we bought RIVN at much cheaper levels but would you consider adding a small amount now? Yes, I remember your guidance, to add slowly and don’t do all at once!

A. The showroom experience at Rivian was great, the people were knowledgeable about both their products and their competitors, and the vehicles were nice, luxurious and rugged all at once. I’m not MORE bullish about Rivian here though, as the stock has doubled from our cost basis and we have trimmed it down. The visit and test drive certainly validated the product for me.

Q. RIVN seems to be doing very well recently. Do you see this stock rocketing higher? A lot of people think their cars are nicer than Tesla. How fast can they ramp up production to become a bigger player in the market? What is your projection for this stock and company in 1-5 years? Thanks.

A. The interior of the Rivian is nicer than Tesla’s interior. It will take maybe 3-5 years for them to ramp up to a million vehicles per year. I expect RIVN could be around $30 in a year and could be at $90 in 3-5 years.

Q. The article seemed to be very bullish on GOOG. Did your meeting in NYC change your thesis or thoughts on GOOG in the near/long term? Are we building out a bigger position in this name?

A. The meeting in NYC didn’t change my thesis on Google, but it did increase my confidence in their ability to use AI to grow and not get hurt by it. I have lots of Google personally already and we did buy some GOOG as noted in Trade Alerts recently. I’d probably buy some more near $125 for the hedge fund.

Q. I’ve been really surprised by META’s massive run this year. Just back in December it was $90 a share! What did you think of their latest earnings report? Do you think META is getting too much love here?

A. We were buyers of META back in December as noted in several reports I sent out back then. The quarter was fine, the company’s cranking out cash. It probably is getting too much love right now but a lot of that love is deserved.

Q. Lastly, can you preview the BLDE write-up? Are we building a larger position in this name? Thank you for answering all of these questions and for this great service! Hope your health and golf game are improving! Thank you again!

A. We’re still working on the Blade article and determining how big of a position to make it. Stay tuned. My health is better. Thanks for the kind words. My handicap is about a 13, down from 25+ five years ago but I need to improve my form.

Q. ROK came out with ER and was light on some numbers and guide. Stock is down 10%. We have had a great run and I trimmed about half the position pre-ER. So I ask you – do we buy this dip?

A. The fundamentals were strong, the company is growing and seeing steadily stronger demand for US-based high tech factories of all sorts. I can think of worse ideas than nibbling some ROK here. We’d trimmed it before earnings as noted in prior Trade Alerts and I’ll probably buy some shares back around $280 if it gets there.

Q. Any comments on the ongoing weakness in SEDG? I do remember some hesitation was expressed some time ago (perhaps relating to the ending of subsidies?) anyway, can you address that one?

A. The end of subsidies and the higher interest rate environment make solar panels much more expensive. We’ve been short solar stocks as noted in the hedge fund against our SEDG long, which I have owned in my personal account and wrote about for Trading With Cody subscribers since it was at $14. We nibbled a little bit of SEDG today near $195 and I’d buy more near $185. We keeping some of our solar shorts for now but have reduced their size lately too as those stocks got crushed.

Q. With the collapse in solar, what’s your take on the industry now that we have stocks like SEDG getting crushed? Is it still good for the long term or has there been a meaningful shift away from it? For instance, Cramer was on this morning saying solar is pretty much toast for a while and prefers wind – a buy signal for solar? Ha.

A. Solar’s in a tough spot as noted earlier with subsidies ending and higher rates. I’m not a fan of wind generation. Solar Edge is the best of the solar companies, along with maybe Enphase.

Q. Questions on $SEDG, what’s causing the drop in the stock this morning and is this an opportunity to add a tranche or should we be holding steady?

A. See earlier commentary. Thank you.

Q. I recently looked at Belfuse and was surprised at the growth that they are showing in the space niche. I bought a 1/3 position in their shares and wondering what you guys think. Also, wanted to see how Cody is feeling these days. Been a subscriber for a good while and have not had the chance to get involved for the Chats. I hope Cody is as good as he sounds, in writing.

A. Thanks for the kind words. We’ll take a look at Belfuse.

Q. Cody, what high-level expectations do you have from HOOD and MP earnings over next 24hrs? Any buying here ahead of their earnings?

A. Tough to game before earnings reports. We did our buying already. Fingers crossed!

Q. What are your thoughts/takes on the SIMO/MXL situation? Huge delta between the current price of SIMO and the merger buyout agreement price. My initial reaction is that it seems the market has fully priced the merger as no longer possible, but with SIMO seeking to enforce it, is there any reasonable chance they prevail? Like TWTR in forcing Elon’s buyout? If so, is that a possible high-reward arbitrage play?

A. There are too many cross currents in that SIMO/MXL merger and with the buyer (MXL) trashing the target (SIMO) and saying business is bad and that SIMO violated terms of the agreement — I’m just staying away from all that drama and looking for the next trillion dollar Revolution instead.

Q. I am wondering if you have recently looked at Palantir? It is an AI play and the company is debt-free and generating cash. Here is a good article for anyone interested (view it in private browser window).

A. Yes, we’ve looked at Palantir but aren’t big enough believers in it to own it.

Q. Regarding AI plays: “defensive AI” is used by states/governments to ID deep fakes and AI-generated content. I’m thinking – w/ the prevalence of scams using “AI” only going to increase in use & effectiveness – that consumers will bang down doors for some defense. Think McAfee for viruses, but now a software or cloud-service you can run to ID or generate probabilities that content you’re reading/watching is from an AI source. Do you see any companies that we could get into early?

A. Great question! Bryce, let’s dig in.

Q. Any chance we can get an updated where-you-would-buy price on our stock list?

A. Yes, I’ll send that out this week or early next week. If this sell-off will accelerate, we could see some good buying opportunities in some of our favorite longs here.

Q. Bryce -great write up on the NYC trip – really enjoy the read. It is good to hear about the different perspectives of the folks you met in NYC. Given what your RE developer friend said, are you & Cody looking to short any CBRE to hedge the portfolio or do you feel all the bad news is already priced in?

A. Cody here. Yes, we are looking at the commercial real estate industry and are trying to figure out if there are any good shorts in that industry or in companies that service that industry.

Q. Not a question – just an observation – the QQQs got up to 18% above the 30 week moving average – that is rare air and has only been exceeded in Aug 2021 in recent years. So a pullback of another 5 to 10% is entirely possible while still remaining in an up-trending channel. At that point would need to reassess if valuations have become attractive. So the buy levels you are preparing will be very interesting to ponder.

A. Thank you for that information.

Q. As this looks to be a good time to be cautious in our portfolios, I was looking for what would be good ideas to short at the moment? Or would you sooner recommend GLD as a better risk/reward setup?

A. I hate talking about shorts with retail investors because you have to stay on top of them and can lose an infinite amount of money when you short. I’ve mentioned some of my favorite shorts a few times lately and they haven’t changed much. AI, APLD, AVGO, BE, CLSK, GDRX, RUN, SPWR, SMH, WCLD.

That’s it for now folks. I leave you with a shot of rural NM welcoming me back last night with a rainbow dropping into what we call Grandaddy’s Mountain because Lori’s grandfather used to sit on his porch and watch this mountain for decades from this tiny town.

Also, don’t forget to follow us on X (aka Twitter) @TradingWithCody.