Get Your Misfit Farm Clothes, Call Option Strategies, Megacaps Outlook, Potential 10-100 Baggers, Etc
Here’s the transcript from this week’s Trading With Cody Live Q&A chat.
Q. Hey Cody, you said yesterday you’re expecting a short term uptrend and are buying some calls. Any calls in particular you like?
A. I don’t like to buy calls on days when the markets are up 1% but I did do some call buying in these things this week (all in the hedge fund, none in the personal account): INTC long dated calls, with strikes from $30 to $35 dated out to 2024 and/or 2025. I have some near-the-money calls with strike prices dated out a week to a month or so on META, SNOW, UBER. But again, I was buying those earlier this week and am not doing any new call buying today. If the markets go down 3-5% or so, I’ll start buying some call options in the hedge fund again, using the same strategy of mostly buying our names that get crushed in broad market downswings, using near-the-money or slightly-out-of-the-money call options dated out a month or so. I am much more patient about the swings in my personal account and don’t have the time or energy to do these kinds of trades there when I spend my time focused on the hedge fund day job.
Q. Hi Cody, Happy New Year! With tech stocks being hammered over the last year, aren’t we getting close to the point where we should be slamming the table on buys for companies like TSLA and RKLB? If we still believe in the thesis/long term prospects for the companies, then this is a great long term buying opportunity, right?
A. I agree. I don’t know what the bottom will be but I do think there could be another whoosh down in a lot of names before the markets bottom. I literally wrote this yesterday: “I often tell newer readers that long-time readers of mine know that I’m not shy of pounding the table and getting aggressive when the risk/reward looks extremely favorable to me. I don’t think we are quite at that point yet, but if we do get another 10-15% sell-off in the broader markets early this year as so many people seem to expect, I’ll likely to get increasingly bullish and long into such a move down. Easy does it for now. We don’t have to draw a line in the sand and declare all-in or all-out.” That’s saying that I think we’re close, but not quite there yet, no?
Q. Cody, why do you think large cap tech got hammered so much (META, AAPL, AMZN, etc.)? Do you think its because of the monetary policy (bubble blowing market)? Do you think we can see those highs again during a more normalized macro environment?
A. The Biggest Bubble Ever that was the result of a 12 year Bubble-Blowing Bull Market that was largely a result of the Fed’s and the Republican Democrat’s Regime long-time desire to avoid any recession or market down turn took these and almost every other tech stock and speculative asset on the planet to unheard of levels of valuations. They are now, after this (perhaps ongoing) crash in tech stocks, somewhat reasonably priced. I think we’ll see most of the megacaps back at those levels in another 5 years or so. Think of this way — for AMZN to get back to $186, it’d have to go up 125% from here. To do accomplish that, AMZN would have to go up less than 10% per year for the next five years (compound growth) and that doesn’t seem terribly unreasonable to me.
Q. Cody, Happy New Year to you and the family for the chat today . You mentioned in your email yesterday, “I do expect that some of the stocks we’re buying these days are putting in their bottoms and are going to be the next batch of 10-100 baggers that I’ll write about in another ten or fifteen years. It won’t be easy along the way but it will be fun to have a few more of those as this down cycle plays itself out and the next phase eventually begins.” Could you elaborate on some of these positions you are thinking could go up 10-100x?
A. Just about anything we’re buying right now, including the mega caps like AMZN and GOOG, could go up 5x or more in the next ten years and just about each and every single stock of my recent purchases that has a market cap of less than $50 billion or so could go up 10x or more, I do believe. That’s why I’ve been scaling into them, after all!
Q. Cody, I feel with the declines in prices it’s a no brainer to keep it simple – META, AAPL, QCOM, TSLA; Large, “safe” ,companies that have a strong future ahead. Can it be so simple…buy now and check back in a few years? Thoughts?
A. I can think of worse ideas. But it’s never really simple to ride it out, be cool throughout the next downswing/crash and actually sit tight forever with them. Give yourself some room to do more lower if the markets really crash again from here.
Q. Are you buying anything today?
A. I have some calls and some puts expiring today in the hedge fund and I’ve been trading out of those as the market has had these wild swings this morning but no outright buying in either the hedge fund or the personal account today.
Q. Cody, feet-to-fire, how would the indexes close at the end of year 2023?
A. My prediction from my Predictions Column the other day: ” So, the stock market is flattish next year. The DJIA will be down 3-5%, the S&P 500 will be flattish and the Nasdaq will be up 5-10%. Small caps will be wild to watch, as there are hundreds if not more than a thousand small caps (and a few stocks that are still mid caps and/or large caps, of course) that are headed that will run out of money and are headed to zero next year. But with the huge sell off in 2022 that we saw in all speculative small cap stocks, taking almost all of them down 70-99%, some will come back and will be up 10-20x. Overall, I’d expect the IWM small cap index to underperform even the DJIA.”
Q. All, I dig all of you. I reckon I’m on the other side politically but don’t give a dam, what is going on is awful on both sides. Can we do better? Great being with all of you LFG in 2023.
A. I don’t even have a “side”. I do find the fact that they’ve done 11 votes last time I looked (I haven’t looked today) and they just keep doing more votes is a great reflection of how inane the whole Republican Democrat Regime is. Their solutions are never solutions. As I see it, they are blatantly bargaining for corrupt trade offs with each other and eventually something behind the scenes will give. But yea, let’s go in 2023, baby!!
Q. Hi Cody, in the most recent update you mentioned that RKLB can be bought, and whoever buys it presumably will pay “huge premiums”. Can you be a bit more specific and tell what “huge premiums” actually mean? Is it 50%, 100% from current levels? What is your suggested approach in managing the position? We started buying shortly after it became public and as a result of it we’re sitting on relatively high cost basis in comparison to the current price levels. Thank you!
A. I don’t know if it will be bought or what the premium would be. I think it’s insane that Australia and/or Northrop Grumman or someone doesn’t just buy RKLB and immediately get the ability to do orbital launches. But you know the old saying about the market being insane longer than space stocks can stay solvent? Wait, that’s not a saying, but it could happen. It’s also possible that Rocket Lab could run out of money in a few years and it could then be bought even cheaper out of bankruptcy or something. This is a start up and Space is hard.
Q. Hi Cody, you commented awhile back that Tesla would be cheap at $165 and I wondered if it’s a screaming buy at $107? How do you see 2023 playing out for Tesla?
A. I’ve been writing about this for the last few weeks and basically there’s a near-term demand issue going on and that’s a concern but longer-term the stock is probably cheap here just on auto sales. I did buy a little bit more for the hedge fund below $110 but I’m not loading up on it (yet?).
Q. Is TSLA or AAPL a better buy here?
A. TSLA, probably, in my humble opinion.
Q. Hi Cody, are you concerned that Elon Musk is alienating the traditional buyers of TSLA cars in blue states with many of his political positions expressed in his twitter feed? Do you think the share price will affect his willingness to state his political beliefs?
A. Yes, here’s what I wrote about it two weeks ago: “The biggest concern is that Elon’s alienated millions of people who used to be idea Tesla owners. How many of the Hollywood people who have left Twitter because they said it had changed under Elon for the worse were going to buy a Tesla but now would buy anything but, for example? Also, I got an email from Tesla yesterday saying they’d give a $7500 off if I’d take delivery of a Model 3 or Y before year end. That basically says Tesla’s going to miss their quarter on deliveries and now on margins too. Whether that’s already priced into the stock is another debate, but there is more potential downside near-term obviously and this threat of missing the quarter looms large now. I think that email I got yesterday morning was received by millions of other people on Tesla’s mailing list and traders probably realized what that meant and that’s why TSLA got hit hard and sold off intraday yesterday. Longer-term, bulls have to believe that the superiority of their product, the critical mass of Charging stations that work very well and the potential of robots and Dojo computing to drive more upside in years to come. But this has been painful this year and I’m not sure when the pain will end near-term.”
Q. What are you rating ENVX post-stock-crash (after anticipating delays in the production of Gen2 battery cell architecture)? It seems like quite the polarizing stock with the bull camp citing immense potential while the bears just call it a scam, lol. Should I cut loose or hold with hopes of buying lower?
A. I’d mentioned in the recent Latest Positions that I’d likely buy more ENVX below $10 and I did nibble a little more in the hedge fund after it fell (way) below $10 this week. I’d also mentioned ” this is a start up and has a long way to go to deliver big revenues from these products that they’re developing and starting to sell. We have to consider this one a venture capital kind of bet with high risk and high potential long-term rewards.” So it goes.
Q. Hey Cody. CRSP PE is now down to 12.6. For a revolutionary biotech stock that seems crazy low. Any thoughts?
A. Uh, I don’t see a 12.6x P/E on CRSP. I see a 25x Price to next year’s REVENUE multiple, no?
Q. The Yahoo finance link you provided for CRSP says PE TTM is 12.6. I’m confused.
A. I provided a link to the revenue estimates from the sellside analysts for CRSP, which is for $150 million or so next year. The market cap is nearly $4 billion. Yahoo’s landing page for CRSP looks like it has a mistake in its P/E number for CRSP which I would bet is a result of a recent recognition of some gain or something and not a reflection of ongoing earnings.
Q. Cody, what are your thoughts on U? What is the price to accumulate more? What are your prospects for this company?
A. If you use a golf simulator or a flight simulator a first-person shooter game on a gaming console, there’s a pretty good chance that Unity’s engine is underlying it. The stock is finally reasonably cheap looking out two years and quite cheap looking out 5 years. I’m a buyer of more near $20.
Q. At what prices would the likes of CRWD & PANW spark your interest?
A. 20-30% below here, I’d be very interested.
Q. What do you think of the advertising unit and other initiatives by UBER? Do you see them getting any traction, or are they a distraction? Thank you very much.
A. We’ll see. I have faith in management there.
Q. Cody, any thoughts on elan?
A. It’s a great company that my dad used to buy from all the time as a veterinarian but there the topline revenue growth looks like it’s shrinking.
Q. Any thoughts on Latham Group?
A. A small cap swimming pool company is not my cup of tea. Sorry.
Q. Cody, ever look at FREY? It’s another battery play.
A. I just did. Have you seen all the trillion dollar companies based in Luxembourg where it’s based? Me neither. I have no edge here but I’d bet that it’s more likely a US-based battery company that ends up becoming bigger than this one. I obviously don’t know it well though. And I will ask my brokers for a report or two on it.
That’s a wrap! Thanks all.
HNY — Happy New Year, everybody! Thanks for being part of Trading With Cody!
I leave you all with a shot of my old Great Pyrenees dog who’s decided it’s no longer worth barking at her other Misfit Farm populace.
Also, check out this online store I built for our Misfit Farm clothing brand that I surprised my wife with for Christmas. Our logo is our mini longhorn cow, Lizzie.
It was remarkable easy and even fun to build the site using Shopify vs any other site builder I’ve ever used, including WordPress. It’s one of the reasons I’ve warmed back up to Shopify at its current valuations.
