Latest Positions: Cloud and Meta (And ChatGPT Does Santa Claus Rally)

My 7 year-old daughter, Amaris, had a minor seizure and broke her leg over the weekend. I might need to run up to Albuquerque to be with her and her mom if she doesn’t come home tonight, so bear with me if I don’t get another post out this week.

All eyes on Fed and CPI this week. Feet-to-fire, I’d expect a better-than-feared CPI and a 50 bps hike from the Fed. Markets will probably like that initially. And then by Friday or early next week, it might do an anti-santa give back. Tough to game that stuff, especially when EVERYBODY trading is focused on it.

I asked ChatGPT the following:

Cody Input:
Talk about the history of Santa Claus rallies and why seasonality exists in stock markets.

ChatGPT Output:

“The Santa Claus rally is a phenomenon that refers to the tendency for stock prices to rise in the last week of December and the first two trading days of the following year. This phenomenon is believed to exist because many investors are in a good mood during the holiday season and are more willing to buy stocks, which can drive prices up. Additionally, many investors may also be rebalancing their portfolios at the end of the year, which can also contribute to an increase in stock prices.

It is important to note that the existence of the Santa Claus rally is not guaranteed, and there may be years when stock prices do not experience a bump during this time period. Additionally, the impact of the Santa Claus rally on overall market performance is relatively small, and it should not be relied upon as a predictor of future market performance.

Seasonality in stock markets refers to the tendency for certain patterns to emerge in stock prices over the course of the year. These patterns can be caused by a variety of factors, such as changes in investor sentiment, the impact of holidays, and the release of key economic data. The Santa Claus rally is one example of seasonality in stock markets, but there are many other examples, such as the “January effect” (a tendency for stock prices to rise in the first month of the year) and the “summer lull” (a tendency for stock prices to be relatively stable during the summer months).

Overall, the reasons for seasonality in stock markets are complex and not fully understood. However, it is important for investors to be aware of these patterns and to consider how they may impact their investment decisions.”

Cody back in real-time with real thoughts. Let’s talk about what makes us all our meaningful gains over time — long-term Revolution Investments in individual names….

Here is a Part 2 of the list my latest personal portfolio positions and most of the hedge fund positions with updated commentary and ratings for each position.

The ratings for each stock go from 1 to 10, 1 being “Get out of this position now!” and 10 being “Sell the farm, I’ve found a perfect investment.” The positions that are bolded are those that I consider to be “core” holdings and am unlikely to ever sell out of them entirely.

Longs –

• The Cloud Basket –
  • MDB MongoDB (7-) – The stock has rallied 50% since we created this basket in early November. The company reported a better-than-feared quarter last week and the stock has been relentless to the upside. It’s a bit overbought like most of the names in this basket at this point, and I wouldn’t want to chase it right now. I’ve taken some profits out of this name and will sit tight with it for now. I’d probably not to look to add more unless it challenges the 52-week lows where we snuck in and bought it in early November.
  • Snow SNOW (6+) – This company is probably the best of the cloud stocks but it’s also, once again, gotten to be just about the most expensive stock in the cloud industry. Trading at 12x sales and far from being outright profitable, it’s got some risk here at this price. The company also reported a better-than-feared quarter and the stock is up about 25% since we bought it for this basket and I’d probably not look to add more unless it drops 10-20% below those prior levels and gets closer to $100 or so.I’ve trimmed this too, of course.
  • Okta OKTA (7-) – These cloud companies, like so many other high growth, high gross margin tech companies, are spending an inordinate amount of money on operating expenses each year. OKTA spends $2 billion a year on OE while generating $1.7 billion in total sales per year. That makes true profitability, as I run it through my equations and algorithms, quite far off in the future. Like 3-4 years out. I’ve trimmed OKTA down and I’m going to trim some more here and make this the smallest position in the cloud basket.
  • Twilio TWLO (6) – This is the cloud stock that I bought too early and it’s actually down since we bought it. It also has the smallest gross margins of the bunch and I’m going to take the loss here and remove it from this basket. Consider this a Trade Alert. 
• The Social/VR/AR Revolution –
  • FB Meta (8) –In the prior Latest Positions post back on June 30 with the stock at $160, I wrote this about Meta:
    “The stock is trading at 13x earnings. It’s even cheaper when you consider that they have about $40 billion or about $16 per share of net cash. It’s even cheaper when you realize that even as Meta’s topline growth rate has slowed from its blazing years past, that it’s still possible to grow 5-10% per year…without assuming any success from Oculus in The Metaverse and VR Revolutions. I’ve made FB a large position again and likely hold it for another year or two as we see if Oculus and the platform its built can maintain its leadership position and maybe end up with some mainstream traction.” Instead of analysts expecting $11 in earnings for next year, they are now expecting Meta to earn $7 next year. I think that’s way too low as the company will be cutting billions out of expenses and might even beat the 3-4% topline growth estimates for next year. If Tiktok gets banned which I think is quite likely over the next year or two, Meta goes up 20-30% the next day. Meanwhile, the Metaverse itself is still revolutionizing and will be amazing in 3-4 years when the headset is just about the size and look of a pair of steampunk sunglasses.

Part 3 coming as soon as I can write it.