Latest Positions Part 2: Clouds, Semi’s and Bubbles
Here is a Part 2 of 5 of the list my latest personal portfolio positions and most of the hedge fund positions with updated commentary and ratings for each position, including another Trade Alert.
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 –
- (Cloud Revolution)
- ZM Zoom (7) – I talked about the valuation of Zoom being way too high in the prior two Latest Positions and about 40% or so from its all-time high when I sent out a Trade Alert about locking in some of our huge profits in it at the time. Since the last report Zoom’s valuation has declined about 16% from $115 billion to about $96 billion as I write this. That values it at about 25x this year’s sales and about 21x next year’s sales. Meaning it is still expensive on those metrics and as you have seen recently what can happen to high priced growth stocks, it could drop further. With that said, I still like the long-term model and it will get more compelling if it drops more.
- DOCU Docusign (7) – A common theme today is that a lot of our high priced high growth stocks have come down quite a bit over the last few weeks. Just like with ZM, the business has not changed just the price that we have to pay for it has. This week alone, the stock has dropped 15% and rallied 10% more than once. It’s still down 24% from its mid February high. I’m patiently waiting to nibble at lower prices.
- SQ Square (7-) – Another one of my recently introduced “-” designations. Since my last Latest Positions report Square has made a round trip from a $100 billion valuation up to $128 billion and then right back down to where it was. Holding steady on this one for now, but getting closer to a nibble if it pulls back more. The company recently bought Tidal from Jay Z who apparently had about a 7-bagger on this investment. He’s joining Square’s board and they are going to try to help people in Africa get banking. I like that.
- (Semiconductor Revolution)
- NVDA Nvidia (7) – – Nvidia is not terribly cheap, but it’s not bubbled up like some small cap semiconductor stocks. NVDA trades at 35x next year’s earnings and about 12x next year’s sales. The company, as I’ve said all along since we bought it a few years ago at $30 per share (vs the $500 its trading at these days), is still perhaps the best positioned semiconductor vendor on the planet because their chips go into driverless, VR, servers, games, salads, etc. Just kidding about salads, but a good tortilla chip in a Mexican style salad is always welcome.
- QCOM Qualcomm (8) – Qualcomm is perfectly positioned for the 5G Revolution. In addition to 5G, with their Snapdragon XR2 chip that is inside Facebook’s Oculus headset, QCOM has positioned itself literally inside the coming Virtual Reality Revolution. Here’s how Qualcomm describes their latest Snapdragon: “ The Qualcomm Snapdragon XR2 5G Platform is the world’s first XR platform to unite 5G and AI. Built to enable unrivaled extended reality experiences, the Snapdragon XR2 5G Platform enables users to explore every angle of their virtual world in 360° spherical view that captures the scene in vivid detail. And with rich 3D audio, users can experience high-fidelity sound in all directions.” The valuation for QCOM is reasonable at 13x next year’s earnings, less than 5x next year’s sales and gross margins around 70%. Throw in the bonus of a 2.1% dividend and you get to the reasons why I recently bought more Qualcomm
- TSM Taiwan Semiconductor (7+) – – Taiwan Semiconductor is the only company that can do what it does, which is not vending semiconductors but what they do is make the smallest and most advanced chips for the companies that do vend and/or use chips. They have more demand for their products than they can possibly meet. It trades at a P/E of 30 for this year’s earnings estimates and about 25x next year’s. That does not make it terribly cheap, but when a company is as fundamentally sound as TSM, you have to own it. Just like with QCOM, I have recently added to TSM on the recent dip in price.
- AMD AMD (6+) – I think it’s time to let go of AMD. We’ve made some small gains on it since we bought it a few months ago, but I am increasingly concerned that double-ordering in the semiconductor world from companies in the smartphone, computer and auto industries are likely going to create a glut of semiconductors in the supply chain over the next six months or so. Of the four semi stocks we own, this is my least favorite and thus, it’s the one that gets cut.
