Latest Positions: Driverless, Social and 5G Revolutions

Here is a Part 1 of 3 of the list my latest personal portfolio positions and most of the hedge fund positions with updated commentary and ratings for each position. I’ll send out Part 2 tomorrow and will finish up Part 3 Wednesday. (And in the meantime, don’t forget to join me Tuesday morning at 10am ET for this week’s Live Q&A Chat. Come directly to the TWC Chat Room or just email us your question to support@tradingwithcody.com.)

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 –

• Forever assets and other permanent holdings –
  • Media, hedge fund and other private investment/business holdings (9+ because betting on yourself and running a business is always a best bet)
  • Real estate, including the office I work out of, some land and the ranch I live on in NM (8)
  • Physical gold bullion & coins (7)
• (Driverless Revolution) –
  • TSLA Tesla (8) – The Cybertruck. It’s truly Revolutionary on several levels. #1) It’s pure function over form. Honestly, why does it matter what the vehicle looks like if it’s better and safer and performs the functions its designed for better than its predecessors (and even creates new functions that no vehicle has ever included before, including a pressurized version someday being the official truck of Mars). #2) The exoskeleton frame. You get more room inside and you can use the weight of the steel frame as protection for the whole vehicle, making it sledge hammer- and bullet-proof. And imagine all the little trees and other obstacles you can simply drive through when you’re on the ranch. After more than a century of building a car around a steel frame with different covers on it, we’ve finally got a new design. #3) The form is strangely beautiful — and it grows on you. Dollars to donuts, will it be five or ten years before the majority of cars and trucks hitting the market have an exoskeleton and are a knockoff design of the Cybertruck? #4) The topline truck’s specs are a true gamechanger with the 500-mile range being the most Revolutionary. 14,000 pounds towing? Faster than a Porsche? Air up your own tires or run air compressor tools from the vehicle? Am I dreaming? 2022 can’t come soon enough and my wife has us one of the first in queue with our preorder for that top of the line Cybertruck with a tri-motor and we’ll also include the ATV upgrade when it’s time. #5) I’ve talked to people as disparate as urban hipsters to owners of a rural well drilling company who can’t wait to get their hands on this Cybertruck. And everybody has been talking about Tesla and the Cybertruck and the smashed unbreakable windows at the debut event (I think it was done on purpose) getting Tesla tens of millions of dollars in free marketing for the vehicles they’re already selling…speaking of which, it’s not really about the Cybertruck for the next couple quarters or years. Like I’ve been saying since we bought this stock earlier this year at much lower levels, it’s all about how many cars the company sells (Model 3 for the next couple quarters and Model 3 and the upcoming Model Y for the next couple quarters) and I think demand is just fine and supply and margins keep improving (China Gigafactory 3 is part of that).
  • UBER Uber (8) – Is Uber ripping its drivers off? Do they make less than minimum wage? Some studies purport to prove that is the case, but I have friends who are Uber drivers. They’re smart business people and they wouldn’t keep driving for all these years if they weren’t making money. Certainly, they all want more share of what the rider’s charged and wouldn’t mind some stock options and health care, but they are certainly at least making quite a bit more than minimum wage driving for Uber. Uber Eats is a business that’s got more competition and well-funded competition than Uber’s primary business of ridesharing. But I think Uber Eats is much better positioned partly by utilizing existing critical mass of Uber’s ridesharing business and app users, and Uber is well capitalized enough to likely become one of the winners in that food delivery business that will be a growth industry for years to come. So I stick with Uber here.
• (Social Revolution)
  • FB Facebook (8) – Everybody hates Facebook and the lack of privacy, the hacking and the time suck that both it and Instagram can be on their lives. But everybody keeps using Facebook and Instagram. And by everybody, I mean the vast majority of the people who have an Internet connection on the entire planet. As for the stock analysis, well, the company is still growing topline 25-30% per year with 80%+ gross margins and the stock is trading at just over 20x next year’s earnings estimates, which are probably too low. I think this stock looks pretty good into year-end and for next year, as 2021 earnings estimates will probably be close to $12  per share, meaning a 20-25x forward estimate on that would get you a $240-300 price target next year. Would you rather own McDonald’s MCD trading growing at 0-2% per year trading at 20x next year’s estimates or FB?
  • TWTR Twitter (8) – Twitter was unfortunately one of my largest positions already when it reported that their approach to privacy is such that the company actually will take a hit to their revenues because they realized they’ve been violating their own privacy policies. I’m not sure Facebook would ever do something like that. In the long-term, I continue to think that Twitter is going to maintain its unique place in our global society and their focus on ensuring users get the best and safest experience they can is a large part of why. I’ve been buying some more TWTR here below $30 per share.
  • SNAP Snap (7) – Twitter and Snap have about the same market cap right now. Twitter will generate twice as much revenue as Snap this year, but Snap is growing its topline 40-45% compared to Twitter’s 15-20%. But Twitter is profitable and Snap is probably going to start being barely profitable next year. I think Twitter’s more established and older if slower growing platform is a safer long-term bet than Snap’s. Snap’s been public for about two and half years now. Do you realize the IPO came at $17. We’ve owned the stock this time since $6 or so per share and I continue to hold most of it, though I’ve trimmed some on occasion, as noted in past Trade Alerts.
• (5G Revolution)
  • TMUS T-Mobile (7) – I’m disappointed that the legendary John Legere, who I long underestimated, is retiring. I’m torn because betting on his genius and leadership was a primary tenet of my buying the stock, but I also know that the company is set up to benefit from the Sprint merger and perhaps dominate 5G with the spectrum Legere had them invest in years ago. So I hold onto the stock for now.
  • QCOM Qualcomm (8) – QCOM is up 20% since the prior Latest Positions when I wrote that “the stock is cheap at maybe 15x next year’s likely earnings of $5 and very cheap on what could be a huge growth cycle in 5G ahead of Qualcomm.” But the stock has actually gotten cheaper since then as estimates for next year’s earnings have gone up to over $6 per share as the stock is now trading at less than 15x next year’s earnings. I’d also noted that “A 3% dividend doesn’t hurt. There’s still constant litigation risk with this name, but I’d load up on this stock if it got hit on litigation headlines.”
  • Cisco (7) – Cisco has been growing at about the same rate as the economy for the last few years, which is about like McDonald’s MCD by the way. Cisco’s routers and software are full of recurring revenue models and the company’s lead in routers and other Internet-related technologies are not likely to go anywhere anytime soon. McDonald’s burgers and fries also create some form of recurring revenue as people go back to eat at these places over and over again. CSCO has 60%+ gross margins. MCD has about 50% gross margins. MCD is trading at 25x next year’s earnings with a 2.9% dividend while CSCO is trading at 13x next year’s earnings estimates with a 3.1% dividend. At any rate, I still think Cisco is going to see higher growth rates in the next few years as the race to spend on 5G infrastructure should play into their hand well.

Part 2 coming tomorrow.