Latest Positions Part 1: Parabolic Charts, Lower Ratings, Higher Risks

Here is a Part 1 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 a couple Trade Alerts.

No surprise that most of the ratings for my long positions are as low as they were back in February when I was worried about the escalating Coronavirus Crisis while the markets, analysts, traders and investors were ignoring the risks it brought. In fact, I employed a new “6+” rating for many of our long positions on our scale of 1 to 10 because I wanted to lower them from a 7-ish level but I don’t think they’re quite as bad as a 6 rating, which would mean I’d consider selling all of that position. The parabolic charts and skyrocketing valuations in many of long positions have me expecting much better buying opportunities in coming days or weeks, even as I clearly still like most of our longs.

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 (6+) – Tesla’s amazing. TSLA is even more amazing as it has rallied some 700% off its lows when we were making it our largest position last year. The stock has become an outsized position for many of us at this point and as a matter of balance, I’ve trimmed a little more in both my personal account and in the hedge fund this week. I am also short a few call options against my TSLA common in the hedge fund to partially hedge the large position there. It’s hard to justify the current market cap of TSLA, but here’s how we can do it: The company will generate $100 billion or so in revenue in four or five years with a 25-35% gross margin, which would mean about $30 billion in gross earnings. Net that out to $15-20 billion or so and throw a 20-30 multiple on those earnings and you’d end up with a target market cap of $300 billion (or about $1800/share) to $600 billion (or $3600/share). In four or five years. The stock is clearly discounting a lot of future growth now, unlike when we had bought it when its market cap was less than $30 billion. I’ve said all along that this could be another trillion dollar market cap stock for us, but that’s looking out over another five years at the very least. But you can never guess when a stock will fully discount its future, so I continue to hold much of the position.
  • UBER Uber (6) – I’m growing tired of looking at UBER. The stock’s not done anything for us since we bought it last year and the fundamentals are obviously in disarray with the Covid-19 shutting down the ridesharing part of the business. Ubereats and other kinds of delivery will be a growing part of Uber’s business and I might revisit the stock in coming months as we get a clearer picture of what Uber will look like post-Covid 19. But for now, I don’t particularly like the risk/reward profile in this name and I’m selling all of it here.
• (Social Revolution) –
  • FB Facebook (6+) – Recall that along with TSLA, SQ, QCOM, TWTR, I’d also nibbled some FB at its recent lows below $150 as noted in “Don’t doubt the USA or mankind’s ability to prosper”. I’m not too terribly worried about the advertiser strike at Facebook, but I am worried about small business spending on FB. Morgan Stanley’s Brian Nowak estimates small businesses comprise 30% to 40% of Facebook’s overall advertising base and I’d assume that part of its business will be down 20-30% this quarter and next. Meanwhile, Facebook’s got to keep spending to tackle hate, bots and other fundamenal issues so I wouldn’t want to load up on FB shares right now.
  • TWTR Twitter (7) – Twitter’s a de facto standard in our society. It’s amazing how little revenue and market cap this company has generated vs its outized impact on our society. Twitter can do better and that’s actually partly why I think there’s still so much upside in this name over the next three years. They will do better creating revenue streams and higher margins and growing the business fundamentals and I don’t think there’s a big a threat to Twitter’s de facto status as there is for Facebook or Instagram in years ahead. Twitter’s core business of microblogging likely can’t be challenged by the kind of innovations that Snap and Tik Tok have delivered in recent years, making them threats to FB and IG.
  • SNAP Snap (6+) – In the prior Latest Positions from back in late April, I wrote: “Maybe the Coronavirus Crisis saved Snap? Because kids use it to communicate and not just post humorous memes and 15 second dance videos? Maybe Tik Tok is actually peaking right now and Snap is about to surge again because young people are using Snap to communicate?” Tik Tok’s got political troubles and I’ve been telling people since it first came out that if you don’t want the Chinese Communist Government prying into your smartphone, you better not use Tik Tok’s app. Snap’s in a pretty interesting place here because of that. I’m holding this one steady.
  • PINS Pinterest (7) –We’ve had a nice pop in this name since we added it during the crux of Coronavirus Crisis a couple months ago. Pinterest is probably in a pretty good position here as people work, shop and explore interests from home. Did you know that Pinterest, founded in 2009, is two years older than Snap? Pinterest took a lot longer to gain traction with users though and I consider their business less developed than Snap’s and certainly than Twitter’s. Which means that Pinterest is still getting their feet on the ground and learning to run revenue growth rates and I think the company’s got some real neat ways of doing that around its interests-centric focus and users.

Parts 2-5 coming this week.