Game plan sticking, Market ignoring, Bitcoin shrugging and more
Here’s the transcript from this week’s Live Q&A Chat, including a Trade Alert about moving on from Cisco here.
Q. I’m trimming a little here. Cody isn’t really telling us to sell or go short..just keep your longs on and trim a long the way up. Keep your percentages of cash to equities where you want it and that is the disciplined approach. My equities up another 7%..I’m trimming..got to stick to the game plan.
A. It gets harder for many investors to stick with the game plan when markets gets Bubblicious like this one is, so good on you for recognizing the importance of sticking with the game plan. It’s also hard to stick with the game plan of buying stocks when markets have crashed, of course, by the way.
Q. Cody, Dang it why is the market ignoring you?!
A. The markets listen to no man! But really, like last week when you’d asked a similar question about this, I’m not exactly bearish and I’m certainly not net short and I’m mostly sitting tight riding our many big winners as I have no idea when or from what level this Blow Off Toppish Action will finish itself out.
Q. Cody remember my question from last week? Whenever the comeuppance arrives, what do you think that will look like. Middle ages desolation or a correction that pauses the jubilation and then continues it.
A. Will depend upon the potential for earnings growth in years ahead, the amount of free money that’s being printed (or not), the interest rates for US debt, etc. Best guess for now is that the markets pull back 5-10% sometime before the end of the year, from who knows what level though, and then we’ll have to see what the Post-Covid economy and outlooks are for 2021 and 2022 into next year.
Q. Any decision on CSCO stock really lagging in a booming tech market.
A. Yea, I’m thinking it’s probably time to move on from it. I am not sure the company’s going to be able to get back on growth mode and will probably wait to see if they can get the tide turned before revisiting the stock. We’ve had a helluva year in our portfolios away from this name and I want to remain disciplined about keeping the portfolio in companies with strong fundamental trends which Cisco has shown itself not to have.
Q. Does an Airbnb ipo look appealing?
A. I wouldn’t be surprised if there’s a better opportunity to buy AirBnB in the weeks and months after its IPO than the day of. I’d rather buy a name like that, if I were ever to decide to buy it at all, when the markets in a panic than the day it comes public.
Q. For the past 3 months I’ve been toying with Bitcoin and frankly I’m not impressed. Other than Bingo money I don’t see an “investment” here. Wallet providers are hinky, security is a broken mess. I call it the digital shrug. Software doesn’t work…”shrug”. Security app is crap…”shrug”…where do I get help…”shrug”. At this point I’m just gonna kiss off my $1500 BTC and “shrug” Thoughts?
A. Haha, I love the “shrug” term. I’m a believer of Bitcoin and have owned since it was at $100 back in 2013 and I remember thinking it was “shrug” worthy at some points back then. I have no idea how bitcoin will trade near-term, but again, long-term, I’m a believer and continue to hold onto it.
Q. At this point I’m just gonna kiss off my $1500 BTC and “shrug” Wow, you cared to buy it now you’re willing to kiss it off? Send it my way, I’ll be glad to give you $1000 for it lol. BETTER YET, buy a cold storage device, download your BTC to that device, and put it in your safe or sock drawer if you want to just forget it for a while.
A. Haha, thanks Steve.
Q. Cody Many of us have a position in Apple which has grown substantially. After it splits the value is the same but four times the shares How do you recommend/teach to reduce a holding 10-20% Yes we can make a contribution to a charitable donation. We can sell ; put it in cash and pay necessary taxes. I understand there is no “one way” that works for everyone. Just interested in your thoughts/recommendations It could apply to Tesla, Zoom, and several other holdings people have beside Apple. Thank you.
A. I usually suggest just trimming some and dealing with the taxes if need be. But donating the shares works too. You can also buy puts occasionally or short a call against the long common positions you have. Options are not a good idea for most people though.
Q. Cody if you were looking to add to small positions in FB AMZN would you start here or wait for a pullback?
A. If you want to own more of them, maybe start with a small fraction of what you want to buy. Maybe 1/5th as much as you want to buy. And then scale into more over the next few days or weeks.
Q. Cody could we get the “where I’d buy more” on our names.
A. Yes, maybe next week. I’m taking the next couple days off.
Q. WORK went up nicely today. Do you believe it will continue to rise.
A. I’m a long-term believer in WORK. No idea how it will trade near-term frankly though.
Q. Cody any thoughts on Elastic $ESTC?
A. With the same ten billion market cap, ESTC has at least a more compelling valuation than BIGC does. Trading at 15x next year’s revenue estimates. But I don’t know the company’s technology well enough to judge its potential. I am going to dig in and look at it more though, thank you.
Q. Hey Cody. This feels too easy to make money but I know you said the market has a way of making the majority of investors look stupid at some point. Does your crystal ball say TSLA is higher or lower than current levels in 12 months?
A. My crystal ball doesn’t work like that, but I can put my feet to the fire and yell out a guess in pain for you: My feet to fire guess for TSLA is that it’ll be at just about these levels on August 26, 2021.
Q. Hey Cody. Many of the Grayscale funds trade at very large premiums to the actual Crypto they hold. Any way to play this? I like the ease of buying thru them but hate the crazy premiums…
A. It’s the ease of buying them that creates the crazy premiums. I’m not sure I’ve got a way for you to arbitrage that though.
Q. And what do you think about BIGC long term with its FB partnership.
A. I suppose it’s great to have a new partnership with FB, but lots of FB partners collapse from lack of strategic positioning as FB’s not always the best partner. See ZNGA for example. Looks to me at a glance here that BIGC did $120 million in revenues in 2019, which was “only” a 22% growth rate over 2018. Let’s assume BIGC triples that growth rate in 2020, which would mean the company would do $200 million in sales in 2020…with a market cap of $10 billion right now as the stock is trading at $142 a share, we’re talking about 50x next year’s sales estimates. Lots o’ spec’o-lation in that valuation there. I don’t like it.
Q. Great article today Cody. I am done trying to time the market. However, if the S&P hits 3500 I believe that will be a major sign for all of us to pause and may be a tipping point. Thanks for your guidance – greatly appreciated through this BUBBLE BLOWING BULL MARKET BLOW-OFF TOPPISH ACTION
A. Thanks, David!
Q. Cody you mentioned in a recent past that, by end of 2020 couple of pharma betting on virus medicine will prevail and others will belly up. Rather than chasing individual tickers, would you suggest couple of good Pharma ETFs ? (Not necessary for virus medicine)
A. I don’t have a good recommendation for pharma ETFs. I’d rather just stay away from the sector for the most part.
