Latest Positions: Facebook at $27, Trillion Dollar Club, Semis

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 Social/VR/AR Revolution –
  • FB Facebook (8) – In the prior Latest Positions write up, I wrote this: “You can buy FB for twenty times next year’s earnings right now. Facebook continues to be my biggest position. If you do not own FB or do not own enough FB, I am ok with you buying a tranche right here or even better if we get a gift of the price coming down after they report earnings tomorrow.” Well, since that report, Facebook has rallied 25% but the stock is still trading at only 23 times next year’s earnings report courtesy of the fact that the earnings estimate for next year is now $16 per share for next year, up from $15ish back in April. I liked FB better at $250 at the beginning on the year when I was pounding the table on it, but I still like it here enough that it’s one of my top 3 positions (which I’ve trimmed down some recently, down from being my largest position back in April). And by the way, as of the $275 price level, FB is now part of the below $1 trillion club, so maybe I’ll move it down to that category next time. Here’s what I wrote about FB when we first bought it at $27 per share after its “failed” IPO:
    “The name I’m adding to the Revolution portfolio is Facebook FB.  And the reaction 90% of you just had (“What? Facebook? Cody, no one wants that!”) is only part of why I’m buying it.  Zuckerberg’s brainchild went from being the most coveted private company in history to the most disastorous public debut in under a month.  But even more important, this was an incredibly successful IPO in the sense that Facebook coming public at a hyped valuation and bumping up its price and selling extra shares means that I now get to buy into a company that has much more cash than it would have otherwise and I’m getting to do it at a big discount to where everybody else was in a rush to buy it.So what if everybody who bought the IPO and wanted to flip the stock for a quick gain got their head handed to them? They aren’t the long-term shareholders that were going to drive up the stock anyway — they were just speculators who gambled and lost. And who cares if Morgan Stanley upset a bunch of its biggest hedge fund customers and the rest of Wall Street for, what, putting too much money in the coffers of the company who went public instead of enabling a bunch of traders to make a quick buck?

    Do you see what happened to expectations in 8 days? The market went from being ready to explode and hand Facebook a valuation three times higher than it has now, to a locking up of  the capital markets because of a bad Facebook IPO, which means valuations for anything tech will be depressed for a while.  Mr. Market always overshoots on the downside and the upside, and Facebook under $27 a share looks interesting to me.”

  • TWTR Twitter (6) – I wish CEO Jack Dorsey was doing as something new and exciting at Twitter, but the company instead just keeps plodding along. Somehow this stock trades at 50x next year’s earnings estimates compared to the aforementioned FB’s 23x multiple. Twitter’s revenues are growing at about the same clip as FB’s at almost 40% this year and 20%+ estimates for next year for each stock. Twitter’s not a big position for me but I’ve owned it since at almost its all-time bottom at like $14 per share a few years ago so I continue to hold some of my core position in this name.
  • Pinterest (6) – Another name we bought at near its all-time lows and that I continue to hold a small position in, sort of like the above commentary on Twitter. Pinterest is struggling with losing its audience to an reopened society more than the other social networks and that’s got the stock in a funk. I will sit tight with the shares I own for now, and I’d probably buy back a few of the shares I’ve sold at higher prices if the stock gets back below $50.

• The Trillion Dollar Club –
  • AAPL Apple (7-) – From the prior Latest Positions write up: “Buying AAPL today gets you in at around thirty times this and next year’s earnings. You are paying that multiple on a company who’s revenue growth is pretty lumpy. Sometimes it is twenty or thirty percent, sometimes it is negative five percent. Apple at a thirty times earnings multiple is about the highest P/E ratio that I have ever seen it. Apple might be my least favorite long-term forever holding that I have right now. But I continue to hold it because it is Apple and I have owned it since $0.20 in March 2003. That and the Apple ecosystem is not going anywhere anytime soon.” Well, not much has changed except the stock has rallied 15% since that write up and next year’s analyst estimates have gone up about 15% since then so the stock is still trading at about 30x next year’s earnings estimates and topline growth is modeled at only 3% after this year’s 35% growth. Methinks Wall Street’s already expecting higher more than 3% topline growth for Apple for next year and I don’t know how much upside the stock’s got for the near-term here. But I continue to hold Apple as I have for 18 years now.
  • GOOG/GOOGL Google  (7) – Google’s been on fire this year, as the stock is up almost 70% year to date. Earnings are supposed to grow slower than the topline estimates for 2022 after a blow 38% topline growth and 80% earnings growth rebound for 2021 off of 2020’s depressed Covid levels. Analysts are modeling but 5% earnings growth for 2022, giving the stock a 28x forward earnings multiple. Not as cheap as FB, not growing quite as fast as FB, but in a better position than AAPL — which is very similar to what I wrote last time.
  • AMZN Amazon (7) – Amazon’s Web Services and Alexa are probably just as important to the market cap as the retail business. The highest sellside earnings estimate for Amazon next year is $82, which would still give it a 40x multiple. Amazon’s on track to do a trillion dollars in sales all by itself in another three or four years. In another five years after that, Amazon’s sales should pass Canada’s entire GDP which might itself be able to grow to $2 billion by then from the $1.7 trillion Canadian GDP of 2019.

• The Semiconductor Revolution
  • QCOM Qualcomm (7+) – Trading at less than 15x next year’s earnings estimates, Qualcomm’s topline growth is supposed to slow from more than 50% this year to 10%ish next year. I think those estimates for next year are too low as Qualcomm’s inside of just not just 5G smartphones but also inside of the 5G wifi hotspots from the likes of T-Mobile and other providers which is starting to win over DSL and Cable broadband subscribers. I think Qualcomm could get to $200 by year end and I plan on holding this, one of my largest positions stead for now.
  • NVDA Nvidia (7) – Last time I wrote: “NVDA is never cheap. I bought Nvidia at [a split-adjusted] $7 per share and it was not cheap then on a fundamental basis. You had to be looking out two to three years even then to have the guts to buy it. Here we are five years later and the stock is at $150 and it is still expensive although not terribly so as you can buy Nvidia at forty times next year’s earnings.” Estimates have gone as fast as the stock has (do you see a theme here?) keeping the valuation steady at 40x next year’s estimates. As I also said last time, “the main reason that I am willing to stick with NVDA beyond my historical reasoning of owning it which was its positioning in the Cloud Server/Autonomous Driving/Bitcoin Mining/Gaming/All of the other Revolutions that it set itself for and that came to fruition is because Nvidia bought Arm Holdings on the cheap when Softbank was desperate and selling assets.”
  • TSM Taiwan Semiconductor (7-) – The US is chipping tens of billions of dollars from the US taxpayer to Intel and other US-based chip companies to try to help them try to compete against TSM. Well, it’s also because the US rightly is worried about China someday invading Taiwan (the “T” in TSM) which would give them immediate leverage over all our entire tech economy at this point as TSM is basically a monopoly in the highest tech, smallest chip fabrication. I plan on holding TSM steady for a long time to come and it’s a pretty big position for me as we have held onto most of our shares since we first bought them at $38 when the stock had a 4.3% dividend. Today that dividend is but 1.5%, which still isn’t bad in an 1% Treasury world.

Coming Soon: Part 3