Latest Positions: Energy, China, Content, And Selling Three Names

Here is a Part 3 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. We will do this week’s Live Q&A chat at 10am ET tomorrow (Thursday) in 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 –

The Energy/Materials Revolution –

• • SEDG Solar Edge (7+) – In Prior Latest Positions, I wrote: “I have a few small solar short positions to try to hedge this solar exposure because I do think there’s a lot of bubblicious aspects to the current solar stock valuations.” Solar stocks just got crazy along with so much of the rest of the market as it bubbled in 2020 and 2021. The good news is that bubble has now popped as most solar stocks are down 60-70% and the best solar stock, SEDG, is down “only” 30%. I’ve covered parts of my solar short hedges that I’ve mentioned before and I still own a decent-sized position in SEDG as I have for years now.
  • MP MP Materials (6+) – This is one of the best performing SPAC stocks that came public in the bubble. It’s certainly Chamath’s best performing SPAC as it’s the only one of his that hasn’t crashed. Trading at 20x next year’s sales estimates, this stock is overvalued even as the company has the ability to grow 40% per year for years as demand for rare earth materials continues to grow. I’m a trimmer of this stock up here near $50 and would be a buyer again at maybe half this price. I’m still holding about half of my original position steady for now.

The China Middle Class Revolution –

• • JD JD.com (8) – JD was our only exposure to China stocks back before they all crashed — and it was the best one to be in, as it’s way outperformed the others on a relative basis. Sort of like with the aforementioned Solar Edge, JD has “only” dropped 30% while most major Chinese tech stocks dropped 60-70% from their all-time highs. JD’s a giant company and its entrenched and it has thus far avoided the crack down from the Chinese government like few other major tech companies over there have. In the hedge fund, I’m usually a buyer of this name in the mid- to low- $60s and a trimmer in the high $70s.
  • TCEHY Ten Cent (7) – Ten Cent has basically been forced to divest tens of billions of dollars of investments that they had in other companies, including in JD. Ten Cent’s disparate businesses of gaming, social media, advertising and so on generate hundreds of billions of dollars in sales each year and that ain’t going away. I have a smaller position in Ten Cent and Baba than I do in JD and that’s by design for now.
  • BABA Alibaba (8) – We waited for years to buy Alibaba as I’m not a fan of the convoluted governance and domestication of this, the biggest, of the Chinese tech giants. When the stock recently got down 60% from the all-time highs that it hit earlier in the year, the P/E got down to less than 15 and the growth rate is still 20% per year or so.

The Content Revolution –

• • NFLX Netflix (7) – Netflix is the best content platform in the world and the fact that they make it easier to consume their content on any TV or smart device and how they even make finding closed captioning and not making you sit through an advertisement for another show whenever you go to watch something….well, I hold my NFLX steady here as I have for years.

Sells –

• • SPOT Spotify (6+) – I love the Spotify service and we’ve made some good money in this stock since we bought it back at around $150 two years ago. That said, I want to take a break from this stock and reevaluate it with a clear head. The gross margins have always bothered me as they are about 30% or so and the growth rate of about 15-20% means that it could take a long time for the company to justify its current 3x revenue valuation. I’ll revisit this name throughout this year and might buy it back because the lock-in and low churn rate for this business is what has always compelled to it.
  • ROKU Roku (6+) – Like with Spotify, I want to take a break on this name. The stock is down big from its recent all-time highs and I am mad at myself for not having just sold it off entirely when the valuation got so ridiculous back at the top of the bubble early last year. I did trim repeatedly and wrote about that, but I could have done better, obviously. We did buy the stock almost perfectly as it took off and went up 8x in a matter of months after we bought and is still up nearly 3x from our first purchase. But I want to clear my head and see if this is the name I’d rather own than any other stock I can find out there.
  • ABNB AirBnB (6+) – This one is a more recent purchase for us and hasn’t gone vertical either unlike the other two names in this sell column. It is, like the other two, an old school App Revolution stock that is still probably overvalued a bit. I’m going to clear this name out here too and as always, will look to revisit it in the future.

Shorts –

• QQQ Nasdaq 100 ETF (7) – I’ve got some index shorts and puts as hedges to our long exposure.
• SOXX Semiconductor ETF (7) – I am back to the SOXX and not SMH as I’ve traded around this short hedge for my semiconductor longs.
• VTWO Small Cap ETF (7+) – I’ve traded IWM for VTWO as I’ve traded around this short hedge for my small cap longs. I continue to think small caps look like they are probably ripe for underperforming the broader markets for the next few weeks, months or quarters.
• Tiny short hedges, rated about a (7) – in FSR, GM, CHTR, SAVA, and others. There is beginning to be a rampant amount of fraud revealed with second tier SPACs and other penny stocks. I’m looking for more individual names to short.  As always, I might cover these at any time and I’m not expecting to make much money on these shorts.  They’re just hedges for the hedge fund and I’m not sure any of these are no-brainer shorts.  Please don’t just go around blindly shorting these for your personal portfolio.

Remember: I wouldn’t rush into a full position all at once in any of these stocks or any other position you’ll ever buy. Patience and allowing the market and time to work to your advantage by buying in tranches is key. Maybe 1/3 or 1/5 of whatever you  might consider to be a “full position” in any particular stock. And I wouldn’t ever have more than 5-15% of your portfolio in any one stock position at any given time. The younger you are and/or the higher the trajectory of your career income, the more concentrated and risk-taking you can be with weighting in your portfolio. But spread your purchases and your risk out over time and over a several positions no matter your age or risk-averse level.

Scaling into a position using an approach of buying 1/3 or 1/5 tranches over time is how I build my personal portfolio positions, but there’s no scientific way to go about investing and trading. Sometimes you have to pay up for the latest tranche but I try to be patient and wait for a temporary sell-off to add to the existing position.

** NOTE FOR NEW SUBSCRIBERS:

If you’re new to TradingWithCody or if you’ve been a subscriber for a while but haven’t acted on much of my strategies yet and/or if you haven’t been in the markets, but you’re sick of getting 0% on your CDs, Treasuries, savings, checking, etc while the markets have been continually hitting all-time highs this year, what should you do now?

Before you ever make any trade, step back and catch your breath before moving any money anywhere. Rank your positions and your whole portfolio and make sure you’re not about to make any emotional moves with your money.

If you haven’t yet read “Everything You Need to Know About Investing” then spend a couple hours doing so, please. It’s a quick read but chock-full of important ideas, concepts and strategies that amateurs and pros alike should understand.

Then, take a look at my own personal portfolio’s Latest Positions and slowly start to scale into some of the ones you like best and/or the ones I have rated highest right now. I’d look to start scaling into a few of the many stocks in the Latest Positions that are at all-time highs along with a couple that we’ve recently featured in our Trade Alerts that I’ve personally been scaling into.

Here’s a picture from an overnight camping trip Lyncoln, my bigger daughter, and I had this past weekend.

Disclosure: At the time of publication, the firm in which Mr. Willard is a partner and/or Mr. Willard had positions in some of the positions mentioned above although positions can change at any time and without notice.