Driverless cars will kill auto insurance, Amazon v WalMart, 5G and more
Here’s the transcript from today’s live Q&A in the Trading With Cody Chat Room.
Q. Driverless will kill auto insurance, and it seems auto insurance is in denial. Look at PGR’s earnings call from August. They’re dubious of autonomous tech? They think they’ll be around in 40 years? It’s almost sad. Now that Google has officially started the transportation revolution in Arizona, can’t we have some fun and short $PGR? Is Progressive any different than Blockbuster? Other than $GOOG and FNVDA, are there other companies to own to maximize gains from the forthcoming transportation revolution? I’m gonna watch one more live Q&A, and then I’m signing up with you. Thanks for reading.
A. I love your thinking on this…yes, over the next 5-10 years, the retail auto insurance industry will be secular decline….do you know if PGR is the most dependent upon auto insurance of all the publicly-traded insurance players? Maybe Berskshire Hathaway with their Geico is in trouble too…hmmm
Subscriber follow-up: I had checked the major insurers, and PGR is the most exclusively auto. (Berkshire (Geico), AllState, etc, all sell home, life, etc.) I do like PGR’s ads, though it’s not a good sign when the best thing you got going for you is your marketing company.
Cody’s follow-up: That’s funny: “I do like PGR’s ads, though it’s not a good sign when the best thing you got going for you is your marketing company. ”
Q. I have some concern with the auto insurance secular decline scenario. They are so wired into state legislatures that I feel like they will figure out a way to legislate mandatory insurance for driverless cars. I think ride sharing as an alternative to owning a car could perhaps lead to fewer cars on the road and be the bigger threat to the auto industry as a whole.
A. There will definitely be mandatory insurance for driverless cars, but the rate of accidents will drop precipitously. The revenues, earnings and margins of suppliers will contract as they have to start selling into a market that will measure it’s customers by the hundreds of government institutions and giant corporations instead of billions of people. I think we can expect to see the car insurance industry undergo a massive competitive price war in to sell into that secularly changing market.
Q. Autonomous/electric/ ride hailing etc. Any hidden gems in the Cody mind space? Or is FANG the safest way? Anything that main street and Wall Street are not seeing in any sector that you are seeing or getting glimpses/flash forwards. Thanks Cody!
A.Oh great question. As noted above, I do think $PRG and any other car insurance company is going to be CRUSHED in ten years from now. Most of the best plays on autonomous cars are well known — we invested in $NVDA almost two years ago BEFORE it was well-known as a play on the auto cars. There will be more opportunities to find great gems in this industry in coming years, of course. Stay tuned, I plan to find them.
Q. Are you favoring solar names over Chip names for the long term? Broadcom may be in sweet spot here with brocade deal complete and Qualcomm on the fence. What is your short intermediate and long term view on $AVGO. I’m currently long up 6.47%. Thanks.
A. I own $INTC and $NVDA and $AMBA for chips and I own $FSLR and $SEDG for solar. I like both sectors! 🙂 I don’t like how aggressively $AVGO has rolled up all the companies that make it up but it has been a great company.
Q. Where do you see $VZ if net neutrality is reversed? Will it impact their stock? One of the example what might follow after FCC overturns net neutrality rules. https://www.privateinternetacc…
A: The idea of trying to game whether or not the Republican Democrat Regime would actually change net neutrality rules meaningfully and that you cold then game what that would mean for individual stocks like Verizon is not my idea of a good trading setup. Net neutrality rules are already not enforced. The fact that T-Mobile can offer unlimited bandwidth streaming for other services like Netflix is ridiculous and a clear violation of net neutrality rules which state that you can’t favor one services bandwidth over anothers. Verizon has spent billions buying content like Yahoo and AOL and they will soon start favoring their proprietary content in their networks which would also be a clear violation of net neutrality rules. Welcome to America 2017 where corporations can do what they want.
Q. HI Cody. What about $WMT? I just bought a little last week. Been reading that they are and will continue to be serious competition to Amazon.
Second subscriber comment: I also bought some $WMT and would love Cody’s views. From what I understand they have assembled a team of top e-commerce pros who know how to compete.
A. I’m not a believer that WalMart and its bureaucratic executives in charge will ever be able to come close to what Amazon and the genius Jeff Bezos has created. Matter of fact, Look at these headlines from 2005 that were touting how WalMart was getting serious about ecommerce to stave off the Amazon juggernaut:
*Target and Amazon Enterprise Solutions Extend E-Commerce …https://progressivegrocer.com/…… Jul 20, 2006 – MINNEAPOLIS & SEATTLE — Target Corp. and Amazon Enterprise Solutions yesterday extended their e-commerce relationship to August 2010, adding two years to the original agreement in which the Amazon.com-owned e-commerce solutions provider will handle the retailer’s online operations. Under the terms of the …
*Hybrid Retail: Integrating E-Commerce and Physical Stores” by …https://www.questia.com/…/1P… Oct 22, 2007 – Traditional wisdom assumes that Web-based retail is a threat to long-established retailers such as Wal-Mart, Home Depot and Sears. Recently Jeff Bezos, founder and CEO of Amazon.com, flatly stated that pure Web-based retail would always offer the consumer a greater selection of products at lower prices than …
I would bet that $AMZN will outperform $WMT in the next five years, but not quite to the extent over the last five years (see chart below).
Q. The rippling effect of getting 5g running smooth creating opportunities like $INTC, $VZ and others like $CALX . Could you speak to this exciting transition we are on the crest of ? Thanks.
A. Yes, 5G is going to be huge. It might take a few I’m not sure pure suppliers to the wireless carriers will be benefit as much as most analysts think though — with there being just four customers, pricing power for the wireless carriers might not match the bull case scenario. I’m looking at Calix $CALX because Robert Marcin asked me to, but I haven’t warmed up to the stock much yet.
Q. When do you think that $VZ‘s investment in 5G starts to pay off? This is the same as asking when wireless displaces cable and fiber providers to individual houses/businesses. Who else benefits when they start making big money from 5G.
A. Lots of friends of mine think that the telecom infrastructure companies are great plays on the 5G buildout, but I want to stick with $VZ for now. Might take 2-3 years, I’d guess, before Verizon has enough of a 5G dominance going to be reflected in the stock though. I’m likely buy some more $VZ this week.
Q. Thanks for your “when I’d nibble” chart for our holdings. But can I ask for your “when I’d close out” numbers for our shorts? For instance, how low is low for something like $P Pandora? We’ve reaped a nice little bit of money on its slide — and thanks for that –but at what point does that stop and/or a company become a target for acquisition? And finally, even though you discussed but never pulled the trigger on shorting $EFX Equifax , I shorted it a few months ago…do you see further sliding from loss of consumer income and/or lawsuits/government fines? (Some think they can handle that.) Should I get out with a 10-15% gain? (I’ve asked this before.) Thanks.
A. You’ve seen me on occasion cover part of my Pandora short to lock in some profits and you’ve seen me re-short some of those shares when the stock has rallied big. But I just don’t see how Pandora gets to profitability. I do think Equifax the stock and the company will be in trouble in coming years and I still might end up shorting some myself.
Q. Any thoughts on ONVO? You had discussed them in the past here in the chat room and now I thought it may be a good contrarian play as its been beaten down ?
A. Onvo is in the business of “early-stage medical laboratory and research company which designs and develops functional, three dimensional human tissue for medical research and therapeutic applications.” The company has $1 million in revenue. You’d have to know this company up and down and have talked with the founders and management personally to bet on a publicly-traded company like this. I’m not likely to end up buying that stock, but I welcome any insights you might have and/or the opportunity to talk to the CEO if you have a connection there.
