Latest Positions Part 4: Content, Genetics, Social, And Bubbles
Here is Part 4 of 5 of the list of my personal portfolio positions and most of the hedge fund positions with updated commentary and ratings for each position.
Notice I’ve been using the word “Bubbles” in each of the Latest Positions this go around? That’s because I continue to think that we are indeed somewhere in the midst of the Blow-Off Top Phase Part Of The Bubble-Blowing Bull Market that we’ve been riding since 2010. I’m not saying the Bubble’s popping, but I am saying exactly this: we are indeed somewhere in the midst of the Blow-Off Top Phase Part Of The Bubble-Blowing Bull Market.
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+) – Netflix made some pretty big news this week when it began to crack down on its users sharing passwords. Research has shown that more than 30% of users share their password outside of their household. I do believe they will be able to convert many of these password sharers to paying customers, that could add some meaningful user growth to the platform. Netflix is getting pressure from other content providers (Disney+, Hulu, Amazon, etc.) but they continue to chug along growing sales around 20% a year. Rumors have it that they might start selling their content to other media outlets, including the major broadcast networks although discussions are apparently very early stage and I’m not sure that Netflix isn’t just messing with the competition. As profits have continued to increase, NFLX is trading at under 40x next year’s earnings estimates. The stock is down 12% from January’s all-time highs. It’s probably worth a nibble on a big down day.
- SPOT Spotify (7+) – Spotify reminds me a lot of what Netflix was a few years ago. Just like NFLX, they have invested heavily in content. As these investments begin to payoff, we should begin to see Spotify’s 25% gross margins expanding just like what happened with Netflix. Spotify is currently trading under 5x this year’s sales estimates. I added a little SPOT recently when it got slammed, and it’s still down quite a bit from late February highs even after rebounding some recently.
- SNE Sony (7) – Just like most hardware manufacturers, Sony is being affected by the global shortage of chips. That’s the bad news. On the other hand, demand for the chips that Sony does make, especially the image sensor chips, are through the roof and that’s good news.Likewise, the good news that they have no shortage in demand of their PS5. In addition to that, he also reiterated Sony’s goal of selling more PS5 consoles in 2021, than the 14.9 million units its predecessor PS4 sold in its first 12 months. Sony has also recently made public their plans to join the VR Revolution with a new VR system tailored to the Playstation platform. As I had predicted a while ago when I wrote that I thought future sales growth estimates were too low for Sony, the company has recently raised both revenue and earnings estimates. The valuation continues to be pretty cheap for the company at about 1.6x this year’s sales and 16x this years earnings.
- (Genetics Revolution) –
- CRSP Crispr Technologies (7-) – Just like a lot of Cathie Wood’s stocks, CRSP has gotten hammered recently. It is down over 40% in the last two months. Crispr still loses a lot of money. They still do not have any meaningful revenue forecasted in the next year or two. With that said, I believe in the Genetics Revolution and Crispr and it’s $1.7 billion in the bank can stick around and be one of the big winners in the space.
- (Social Revolution) –
- FB Facebook (8+) – Facebook is my highest rated stock right now. It is cheap (20x next year’s earnings), it is growing revenue at around 20-25% per year, it has roughly 2.8 billion users, blah blah blah. And that alone got us into FB a long time ago. But what really excites me right now with Facebook is their focus on the Virtual Reality Revolution and even further in the future the Augmented Reality Revolution. I recently listened to a podcast (check out The Information’s 411 on Spotify) where CEO Mark Zuckerberg laid out the company’s current and future plans in regards to VR/AR. I came away from that interview even more pumped about where these Revolutions are heading. Facebook is currently working on not just the next version of their Oculus VR headset but also the one after that. Zuck imagines a future where you are control your Oculus with signals from your brain. Don’t panic, he sees them taken from sensors in the strap of the headset, not from chips implanted in your brain like Elon wants to do. They are leveraging their virtual reality technology and growing market into the future augmented reality market as well. Later this year, Facebook in partnership with Ray-Ban is releasing their first augmented reality product, Smart Glasses. This is the first iteration of Zuckerberg’s vision of the next major computing platform, a combination of augmented and virtual reality. He sees a future where we will be able to do things such as virtual meetings where everyone involved shares spatial sense of seeing each other sitting around a table instead of through a 2D grid on a Zoom call. Facebook is becoming the world’s first virtual social network. As I laid out last week, I have added to Facebook recently and have made it one of my largest positions.
- TWTR Twitter (7-) – The next three Social Revolution companies simply are not as good as Facebook right now. However, each of these three have room to grow and develop thus they have a place in our portfolio. Let’s start with Twitter. The heat that Jack has taken from censorship on Twitter has not shown up in the share price. Other than the drop during the volatile last two weeks, TWTR has been on a tear. In the prior Latest Positions report I wrote, “Wall Street expects Twitter’s topline growth to accelerate this year from 5% or less to the mid-20%s for next year. I expect that Twitter can indeed get back on the growth train like that, but I’d rather Wall Street not be on board the same train already.” Well, growth has accelerated like I thought, but Wall Street is already pricing it in. The stock was up almost 50% from when I wrote this before giving back some of those gains over the last two weeks. With that said, it’s still not crazily expensive right now at 10x next year’s sales and returning to profitability in 2021. It’s a hold.
- SNAP Snap (7) – Snap has been a huge winner for us since buying at $6 per share. Its now almost a $100 billion dollar company (golf clap). Does it deserve to be almost the size of Twitter and Pinterest combined? Well, it’s growing the fastest at about 50% per year. But Snap’s gross margins are not great at 53%. It is trading at 25x this year’s sales and 17x next year’s. It feels a little expensive to me at the moment. I’m holding this one too. It’s probably not a good value for a brand new investor and if you have owned it since $6 and didn’t listen last time, it’s probably a good trim here.
- PINS Pinterest (7) – After Pinterest stock spiked up to $90 in after its latest earnings release, it’s back trading at just over $70 a share, just about the same price where I wrote the previous Latest Positions report. My thoughts on PINS are about the same as last time. Earnings estimates have come up since I that article, so I suppose Pinterest is getting a little closer to a valuation where I’m comfortable adding to the position. Pinterest is probably my favorite of the three non-Facebook social media companies and I would be a buyer of PINS if it gets down close to $50 a share.
