Latest Positions Part 4: Content, Genes and Shorts

I’m taking the next week off from writing as I finish up my Great Reset although if something crazy happens in the markets, I’ll send something out. Otherwise, I hope you all have a great weekend. I leave you with a picture of our 1 year-old Great Pyrenees when she confiscated my seven year-old daughter’s princess castle tent a few weeks ago.

And here is a Part 4 of 4 of the list of 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 Content Revolution –

• • NFLX Netflix (7-) – Remember when people were freaking out when Netflix split its DVD business from its streaming business? I do. As  matter of fact, my buddy Rod is still a Netflix DVD subscriber that gets his DVDs in the mail, watches them and then sends them back in the little red envelope. NFLX’s streaming business is worth around $223 billion. Their little red envelope business is worth zero. It is a good thing that they split those two businesses a few years back. I heard they are in talks to sell their DVD business to Blockbuster (also worth zero, so might be a good deal). Enough cracking myself up. Netflix has reached enough user base and enough revenue per user that they can spend on content. It was not that many years ago that all of Hollywood spent about $20 billion making movies. Now NFLX spends that much on content just by themselves. That is only possible because as they smartly went for complete critical mass around the world and have darn near gotten there.
  • SPOT Spotify (7-) – Spotify is back down around the level that I mentioned nibbling a little in the prior Latest Positions report.  SPOT recently reported earnings and dropped more than ten percent on disappointing monthly active user numbers. I guess that is fair. But what I am really keeping an eye on is how Spotify is going to deal with the increased competition that they are seeing. Spotify has recently responded to competition from live audio app Clubhouse by purchasing Betty Labs, parent company of the Locker Room live sports audio company. Time will tell if acquisitions like this are going to be successful in fending off Clubhouse, Apple, Amazon and other future competitors. After the recent drop in share price, SPOT is another of those stocks that we own that are not crazily overvalued or are just jumping off the screen screaming a buy for me. Trading around four times next year’s sales, mid-twenties gross margins and not being profitable for a couple more years leads me to just sit here and watch it and hold steady for now.
  • SONY Sony (7) – In a busy week of earnings reports, Sony was another of our names that reported so so numbers and the stock took a little hit as a result. It has been a common theme in these reports that as the world attempts to re-open, that user engagement is starting to wane. Is that trend going to continue? As I have said before, I do not think that it is smooth sailing ahead with the pandemic and we could easily see rolling shutdowns in under vaccinated countries which could ultimately drive user growth and an increase in engagement with the companies that we follow. Obviously gaming Covid is not the reason that we are investing in these companies, but investing in emerging, revolutionary markets like content and gaming are why we stick with a company like Sony. With that said, Sony is growing revenue in the single digits, earnings are forecasted to go down next year and at one and a half times next year’s sales, the market is pricing in that slowdown. We have owned Sony since $15 and other than being up so much on it, Sony probably needs to show me something to keep me from souring on it.
  • ROKU Roku (6+) – As I wrote in the previous Latest Positions, Roku is positioned to be the bundler of the unbundled streaming networks. Cord-cutting continues to gain momentum as proven by AT&T selling off a portion of their DirecTV business in February. They would not be selling if that business was doing well. I think the days of subscribing to 150 channels that you never watch, as I have been explaining for literally fifteen years now, are well past their peak and that trend away from those bundles will only accelerate as more and more content providers make their content available in an a la carte fashion. Risks to this business model are the increases in competition and higher costs, as witnessed this week with the information that Roku could lose access to YouTube TV in a breakdown between in negotiations between Roku and YouTube parent company, Google. Roku is another stock that’s probably a bit overvalued right now. Holding steady.

The Genetics Revolution

• • CRSP Crispr (6+) – I am really torn on this stock. But as part of the Great Reset, I am going to let it go, selling all of my CRSP for now so I can revisit it later with a clearer head. 

Shorts –

• QQQ Nasdaq 100 ETF (7) – I’ve got some index shorts and puts as hedges to our long exposure.
• SMH Semiconductor ETF (7) – I am back to the SMH and not SOXX as I’ve traded around this short hedge for my semiconductor longs.
• IWM Small Cap ETF (7+) – I’ve got some index shorts and puts as hedges to our long exposure — I 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 BLNK, , EGHT, CHTR, FSLR, and others. There is beginning to be a rampant amount of fraud with second tier SPACs and other penny stocks. I’m looking for those 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.

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.