Latest Positions Part 2: The Final Frontier, VR, Trillions, Semis, Energy

Here are a few more pics from my running around that forest fire yesterday as my office was on one side of the mountain and our new house is at a lower elevation on the other side of the mountain.

And here is a Part 2 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.

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 Space Revolution –

• • SpaceX (8+) – Without a doubt, this is the most revolutionary private space company ever created. Unfortunately unless you have millions of dollars and are willing to pay high fees to own it in the private markets, it’s kinda off limits to most people. SpaceX is regularly launching rockets (sometimes even returning them to the launch pad after delivering their payload to orbit), satellites and even astronauts to space. In fact, as I write this SpaceX has not one but two spacecraft docked at the International Space Station, delivering astronauts to the space station. SpaceX’s satellite broadband business, Starlink, has over thirteen hundred satellites in orbit and Elon Musk has recently said that it could exit beta testing by the end of summer and be fully mobile (used in moving cars or at different addresses) by the end of 2021. In disrupting the broadband industry, Starlink could eventually be worth as much as if not more than SpaceX’s rocket business. This company is truly changing the world.
  • VACQ Rocket Lab aka Vector Acquisition Corp (8+) – This is my favorite publicly traded space stock (SpaceX is clearly my favorite but it is private). The stock has come down quite a bit from where we bought it. As I said in the prior latest positions, I made it a very big position in both my personal account as well as the hedge fund. Rocket Lab, like SpaceX, is currently sending rockets and satellites to space (they will have their twentieth launch mission appropriately named “Running out of Toes” in the middle of May, launching their one hundred and sixth satellite). I will be watching this launch live here. The rest of the rocket companies wish they could do what Rocket Lab and SpaceX are already doing.
  • All the other public space companies (6+) – As the Great Reset has forced me to take a closer look at the portfolio, I am putting the rest of my space stocks under increased scrutiny. Simply put, the rest are just not as good as SpaceX or Rocket Lab right now. They have a variety of issues like insider selling, not yet proving that they can do what they claim, or are just early in their growth cycles. I am not selling this other basket of space stocks right now, just holding steady and closely watching them until they show me what they can do.

The Social/VR/AR Revolution –

• • FB Facebook (8) – Facebook is trading at about twenty times next year’s earnings. It is consistently growing the topline at twenty to thirty percent per year pandemics or no pandemics, privacy changes or no privacy changes. I, like a lot of people have been really hard on Facebook about them being so lax with people’s privacy. But if you think about it, other than the Cambridge Analytica scandal a couple of years ago, Facebook really has just followed the rules. People use Facebook and allow the company to track them and as a result, FB makes a lot of money selling targeting advertisements with that data. That is what the government’s rules allow. That is what Google’s and Apple’s operating systems allow. Now Apple is badmouthing Facebook because they were following the rules that Apple made? This corporate trash talk did not start until Apple changed the rules, so that they can market the ability to be slightly more private than the Android Operating System. I do not think this hurts Facebook at all. I do not think it hurts growth and I think they will be able to target people with advertisements just as well as ever. Beyond all of that you have the Oculus Virtual Reality Revolution gaining momentum. 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 traunche right here or even better if we get a gift of the price coming down after they report earnings tomorrow.

The Trillion Dollar Club –

• • AAPL Apple (7-) – 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 is not growing at thirty percent next year, it is not growing at twenty percent, it is likely to growing at most five to ten percent next year even during an iPhone “Supercycle” replacement time frame. Meanwhile, Tim Cook has basically ceded the Virtual Reality Revolution and Apple’s operating system as a platform in virtual reality to the Oculus and Facebook. 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.
  • GOOG/GOOGL Google  (7) – I hate Google. Not the stock, but the company. Remember their motto, “Don’t be evil”? Talk about irony to the utmost degree. The CIA, through an early purchase that Google made was literally an early investor and customer of Google’s. That motto had to be an inside joke, right? With that said, just like Facebook, Google grows pretty consistently every year. Not quite as quickly as FB, more like fifteen to twenty maybe even twenty five percent most years. Google, like Apple, seems like it is always in trouble about privacy standards (I am sure that Google and the CIA are very protective of your data). Anyway, you can buy Google for about thirty times next year’s earnings. That valuation puts it right between FB and AAPL. I think Google still innovates. Well, they buy companies that innovate so at least it makes it appear that they still innovate. That makes Google better than Apple too, but not as good as Facebook at these levels. Holding.
  • AMZN Amazon (7) – Amazon is going to do more than half a TRILLION dollars in revenue next year. The first thing that makes me think of is how badly the Federal Reserve and the Republican/Democrat Regime have devalued the dollar such that five hundred billion dollars can ever be generated by any one company, but I digress. Amazon has been growing at twenty to thirty to even forty percent for decades and that is why it can do half a trillion dollars in sales next year. You can buy AMZN at fifty times next year’s earnings but because it is still led by Jeff Bezos (still chairman and likely chief visionary) I am still pretty sure that it is positioned better than Apple for the future. I would rather pay fifty times next years earnings for Amazon than pay thirty times earnings for Apple. But I really do not want to pay 50x for Amazon or 30x for Apple.

The Semiconductor Revolution

• • QCOM Qualcomm (7+) – I just hung up the phone this morning before writing this with Vitaliy Katsenelson who is one of the best value investors and trend analyzers that I know. He talked about how Qualcomm is likely to help Microsoft try to catch up with Apple’s M1 chip in their laptops. As I mentioned when I bought my MacBook with the M1 chip that I was blown away by being able to use mobile apps and especially the improvements in battery life that the M1 enables. If this collaboration happens, that would be a revenue stream that no one is modeling into their QCOM analysis right now. Starting in two to three years, that could add two to four dollars to Qualcomm’s earnings, which according to Vitaliy’s back of the envelope math could lead up to thirteen dollars of earnings in 2024. I think you could throw a fifteen or twenty multiple on QCOM which could mean fifty to one hundred percent upside from here. Vitaliy and I liked Qualcomm much better at $58 when no one else liked it. There are a lot of people on the QCOM bandwagon these days. Even though their revenue is historically quite lumpy and it is currently trading at seventeen times next year’s earnings, I  still like QCOM here and it is one of my top five largest positions.
  • NVDA Nvidia (7) – Oh how I struggle with this one. NVDA is never cheap. I bought Nvidia at $30 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 $600 and it is still expensive although not terribly so. You can buy Nvidia at forty times next year’s earnings. But 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. I mentioned the QCOM/MSFT potential partnership that could challenge Apple and their M1 chip earlier. What do all of those chips have in common? The correct answer is that they are all based on the Arm platform. They have to license NVDA’s Arm technology to build those chips. Royalty revenue is extremely high margin revenue, much higher than outsourcing the manufacturing of a semiconductor chip and then selling it revenue. I have wanted to own Arm Holdings ever since Softbank bought it and now by virtue of owning NVDA, I own Arm Holdings which is why it is a forever holding for me (being up 2000% on it does not hurt either).
  • TSM Taiwan Semiconductor (7-) – Speaking of having your chips made by someone else, I bring you Taiwan Semiconductor. This company has a monopoly on advanced chip manufacturing. In addition to all of the companies out there using Arm technology to make their chips work, to actually manufacture those chips they all go to…Taiwan Semiconductor. Intel is going to spend twenty billion dollars with the help of the United States government welfare money, to try to compete with TSM. As an American citizen I hope they pull it off, but as an investor I am doubtful they do. Intel is five to seven years behind TSM and $20 billion does not automatically fast forward that roadmap.

The Energy/Materials Revolution –

• • SEDG Solar Edge (6+) – Like so many other stocks, Solar Edge is overvalued. For eight years I have been talking about how solar is my favorite clean energy sector to invest in. I had to wait until a prior alternative energy bubble had popped to get excited in investing in solar. I cannot help but feel that solar is again in a bubble that needs to pop. SEDG at nearly fifty times next year’s earnings is indicative of the overvaluation and perhaps bubblicious part of the phase that solar is in. I do not sell my Solar Edge but I hedge it with a basket of crappy solar stocks in the hedge fund.
  • MP MP Materials (7-) – I continue to own MP stock despite its association with that slick Chamath guy (you can expect him to bail out of this stock when it is down, claiming to need the money to invest in some other investment scheme that he has dreamed up). I mentioned that I bought more MP recently during the downturn. It has popped about twenty percent since then. I had trimmed some at higher prices and have not replaced as much as I trimmed. The company has its own monopoly in the United States as a burgeoning rare earth minerals supplier. The risk is inherent in the word burgeoning. MP is not there yet and still have to prove that they can pull it off and make money doing it. I am holding steady for now.

Coming Soon: Part 3