Latest Positions: Mobility And Cloud Revolutions

With fourth quarter 2023 earnings reports from our portfolio companies pretty much done, it’s time to update our Latest Positions. Here is Part 1 of the list of my latest personal portfolio positions and most of the hedge fund positions with updated commentary and ratings for each position. (By the way, We’ll do this week’s Live Q&A Chat at the regular time today (Wednesday) at 3:00 pm ET in the TradingWithCody.com chat room or as always you can email your questions 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 the best bet)
  • Real estate, including the ranch I live on in NM (6)
  • Physical gold bullion & coins (8)

• (Driverless/EV/Mobility Revolution) –
  • TSLA Tesla (8+) –  It’s widely agreed upon by almost everybody on Wall Street that no consumers want electric vehicles (EV) anymore and that EV sales have peaked in the US, perhaps forever. What everybody seems to be missing is that it’s the non-Tesla EVs, those from Ford, GM, Volkswagen, etc, with their slow and buggy software, their exaggerated range and their old-fashioned form factors that look just like every other car has looked like for the last two or three generations of consumers. Recall last year when Bryce and I test drove just about every mainstream EV on the market and found that only Tesla and Rivian were any good. The rest were intolerable. Of course, the aforementioned major car companies have wasted billions trying to develop non-crappy EVs and have smartly (at least for now) decided to majorly cut their EV spend. Meanwhile, Tesla keeps its pedal to the metal (pun intended) as a real tech company that continually innovates, cuts costs, improves manufacturing and, most importantly for now, delivering real cars that real people love love love to drive. Of course, we have to deal with the endless Elon Musk backlash and his partisan tweeting. It’s pretty amazing that it is mostly the same liberals/Democrats who loved Elon and Tesla and fought to give this company tens of billions of dollars in direct and indirect subsidies (welfare) who now hate the guy and his companies. On the other hand, it was the conservatives/Republicans who mostly hated the “green” and environmental learnings of Elon and his companies but who now embrace Elon as a “hero” of the “right”. I still hardly know any hard core Republicans who own a Tesla. I think Elon was probably right in ignoring all the anger from both sides for all these years but perhaps he’s gone too partisan lately for too long. I bet I’ve written and/or said this sentence 100 times in the last two years: “I wish Elon would quit tweeting!” Anyway, in five years, I don’t think any of us will really talk much about Elon’s tweeting and that Tesla’s long-term fortunes depend almost wholly upon the company delivering great products and continually Revolutionizing the world. All of you are aware that we recently published The Ultimate Tesla Book (With The Ultimate Tesla Model!) which outlines our long-term Revolutionary vision for Tesla. (The book became a Top 10 Bestseller in its categories over the weekend by the way). Our optimistic but realistic financial model for Tesla shows it kicking off more than $2 trillion of profit in 2040. TSLA is probably a bit overvalued right now if its just a car company. But it’s not just a car company. The Optimus Robot, the Dojo AI, Full Self Driving/Robotaxis, and other, as yet undisclosed revenue streams, are potential trillion dollar kickers for TSLA invsetors. As such, I continue to hold the stock mostly steady after having removed most of our TSLA hedges a few weeks ago and I’d probably buy more Tesla for the hedge fund and my personal account if it drops below $160 or so.
  • Uber (UBER) (7) — Uber has the critical mass, the network effects and the data it needs to maintain its now nearly monopolistic status. The company reported another strong quarter. Some highlights from the quarter include: “Fourth quarter trips and monthly active platform consumers grew 24% and 15% year-over-year, respectively Fourth quarter Gross Bookings grew 22% year-over-year and 21% year-over-year on a constant currency basis.” And just as importantly, Uber reported that “As part of our goal of being the world’s best platform for flexible work, announced over 20 new improvements to the Uber Driver app, while also making earning on Uber safer with features like Record my Ride and fairer through improvements to our account deactivation process. Drivers and couriers earned an aggregate $17.2 billion (including tips) during the quarter, with earnings up 24% YoY, or 23% on a constant currency basis.” For all its critical mass, Uber needs to keep drivers happy and individually profitable for their business to keep growing. Meanwhile, Uber’s been investing in AI for years and they are now starting to see some of the benefits of those investments with their unrivaled data. Logistics are a low hanging fruit for AI and Uber’s business is, in most ways, simply logistics. Expect higher margins and more growth as AI helps Uber figure out how who and what should go where when. We’ve trimmed a little bit of our UBER here above $80 and we’d look to buy more UBER below $70.
• (Cloud)
  • Autodesk (ADSK) (8) – Not only did Autodesk report a strong quarter for the top and bottom lines, but the company also validated our AI-related reasons for initiating and building up this stock. “Autodesk is getting closer to a transformational leap where Autodesk AI is to design as ChatGPT is to language. Our new multimodal foundation models will enable design and make customers to automate low-value and repetitive tasks and generate more high-value complex designs more rapidly and with much greater consistency. We can already generate 3D representations from images 10 times faster and with faster higher-quality and currently available through the AI. We’re bolstering our homegrown capabilities and data with partnerships and acquisitions in existing and adjacent verticals. Our recent bidirectional integration of fusion with cadence and the acquisition of payouts are good examples. Our go-to-market and platform initiatives will drive even greater operational velocity and efficiency within Autodesk, which will free up further resources to invest in our industry clouds and capabilities, including AI and sustained margin improvement.” That sure sounds a lot like some of our original analysis when we bought ADSK a few months ago: “We have studied many of Autodesk’s AI tools in-depth and it is clear that they make engineers, architects, project managers, etc. much more efficient and productive. As Autodesk’s software saves its customers more time and makes them more efficient with AI, it becomes incrementally more valuable to the customers. As the software becomes more valuable to the customer, Autodesk can charge more for the software. Thus, as Autodesk integrates more and more AI tools into its ecosystem, it should have plenty of room to increase average selling prices (ASPs) and help drive revenue growth.” Autodesk has the data and is now figuring out how to use AI in ways that no other company can compete with. The automation of design that Autodesk AI will enable is going to drive growth and margins for Autodesk for years to come. This unique and leading cloud stock is trading at about 25x our estimate for earnings next year. Most cloud stocks are trading at about 25-30x our estimates for revenue next year. I bought a little more ADSK after the report and would buy another tranche at $220 or so.
  • Crowdstrike (CRWD) (7) – We just recently snuck in and bought this stock around $275 a couple weeks ago when it got hit hard after its competitor Palo Alto Networks reported a disappointing quarter and all cybersecurity stocks got hit. Crowdstrike describes itself this way: “We provide cloud-delivered protection across endpoints and cloud workloads, identity, and data. It offers corporate workload security, security and vulnerability management, managed security services, IT operations management, threat intelligence services, identity protection, and log management. The company primarily sells subscriptions to its Falcon platform and cloud modules through its direct sales team that leverages its network of channel partners. It serves customers worldwide. The company was incorporated in 2011 and is headquartered in Austin, Texas.” I’d simply call Crowdstrike one of the top two cybersecurity stocks on the planet and as hacking corporate and government networks is always a growth business, so too will cybersecurity be a long-term growth industry. We are still getting to know this company and have a small common stock position in the name. More on this stock as we learn more. I’d probably buy more CRWD near $250.
  • Palo Alto (PANW) (7) – Palo Alto is another good cybersecurity stock. Compare and contrast how Palo Alto describes itself vs Crowdstrike: “Palo Alto Networks, Inc. provides cybersecurity solutions worldwide. The company offers firewall appliances and software; and Panorama, a security management solution for the global control of network security platform as a virtual or a physical appliance. It also provides subscription services covering the areas of threat prevention, malware and persistent threat, URL filtering, laptop and mobile device protection, DNS security, Internet of Things security, SaaS security API, and SaaS security inline, as well as threat intelligence, and data loss prevention. In addition, the company offers cloud security, secure access, security operations, and threat intelligence and security consulting; professional services, including architecture design and planning, implementation, configuration, and firewall migration; education services, such as certifications, as well as online and in-classroom training; and support services. It sells its products and services through its channel partners, as well as directly to medium to large enterprises, service providers, and government entities operating in various industries, including education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications. Palo Alto Networks, Inc. was incorporated in 2005 and is headquartered in Santa Clara, California.” Palo Alto is 30% older than Crowdstrike; and as its growing its topline at about 15% per year, it’s growing 1/2 as fast as Crowdstrike; and trades at 50x next year’s earnings estimates vs trading at 100x next year’s earnings estimates (compare both of these cloud stocks to Autodesk, which is growing its topline at 10% per year and is trading at 25x near year’s earnings estimates). We snuck in and bought this stock after its recent poorly-received earnings report and have a gain on it for now. I’d probably buy more PANW near $250.
  • Unity (U) (6-) – I’m sick of Unity’s stupid ad business. Their video game engine is a great business and will probably benefit from AI-generated video games but the ad business has been a terrible drag on Unity since they bought a smaller cloud ad business a couple years ago. That side of the business hurt the company’s earnings report yet again. I’m bailing on this small position and removing it from my screens so that I can clear my head for a quarter or two and then perhaps revisit it then. Trade Alert, we are selling our Unity (U).

That’s it for now. More to come tomorrow!

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 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, and you are trying to put some money to work while the markets have been rallying 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 of 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.

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.