Latest Positions Round Up Underscores My Recent Cautiousness

Let’s start the week with a smile. Bet you can’t watch these two videos of my daughter Amaris and me playing without smiling and laughing.

Here is a list of my latest positions with updated commentary and ratings for each position. You’ll notice I’ve got some cautious commentary on my longs because of their valuations and I’ve knocked the latest rating for most of my long a bit lower than usual — and you’ll notice I’ve got a lot of 8-rated shorts. That’s reflective of my continued higher levels of cautiousness these days.

I’ve broken the list into Longs and Shorts. And from there, I’ve broken down each list into refined categories in order from the largest positions within each category to the smallest. I also give each stock a current rating from 1 to 10, 1 being “Get out of this position now!” and 10 being “Sell the farm, I’ve found a perfect investment.”
Longs –

• Forever assets and other permanent holdings –
  • Media and other private investment/business holdings (9+ because betting on yourself and running a business is always a best bet)
  • Real estate, including land and the ranch I live on in NM (8)
  • Physical gold bullion & coins (8)

• Primary stock exposure portfolio
  • AAPL Apple (7) – Apple’s business model being focused on selling hardware instead of gathering, exploiting, selling and otherwise profiting from people’s data separates it from most of the other giant tech companies from Google, Facebook, Microsoft and even Amazon. Apple’s far from perfect, including in its approach to gathering and managing people’s data, but it’s business model is not dependent upon annoying you with ads and tracking tricks.
  • AMZN Amazon (8) – Amazon’s tracking you, your purchases, your clicks and other things too. But like Apple (unlike Google and Facebook,) Amazon’s business model is not built completely upon gathering and using data to annoy you.
  • FB Facebook (6) – Facebook’s deservedly in the doghouse for how it has handled, sold, tracked, misused, and mislead people and their data. The EU more than the US is going to step up its regulation and control of Facebook and Google and their approach to data. I wouldn’t be quick to brush these issues aside and as I’ve been saying all year, I do think Facebook and its stock could struggle in 2018.
  • GOOG/GOOGL Google (6) – Google’s got probs too. Google’s been in the EU regulators doghouse before many times but never quite to the extent that it currently is in the data data data issue that’s flared up as people realize the extent to which their privacy is completely gone online. I expect there are billion dollar opportunities in the private/secure/encrypted Internet business: The completely private anti-Google search engine. The completely private anti-Google mobile OS. The completely private anti-Google/Microsoft browser. The completely private anti-Facebook/Instagram social network. Like I said, Google’s got probs too.
  • SNE Sony (8) – Sony’s trading at less than 1x trailing revenues. That is, the company is worth $65 billion and will do $80 billion in sales this year. Why? Sony’s net margins are much lower than most of our other Revolution Investing companies. It’s also growing much slower than most of our other Revolution Investing companies. But we bought Sony when it was trading at less than 0.25x trailing revenues. The stock has quadrupled since we bought it but I do think there’s plenty more upside to come here in coming years as the company’s growth rate has picked up and profitability has improved too.
  • NVDA Nvidia (6) – This company was worth $15 billion when we bought it. Two years later, it’s now worth $140 billion. Two years ago, the stock traded at about 3x trailing revenues (in 2015, Nvidia did $5 billion in revenue). Now the stock trades at 10x trailing revenues (in 2017, Nvidia did $10 billion in revenue). I’m not going to sell my Nvidia just because its valuation has gotten stretched, because the company could grow sales 5-fold in the next five years — that’d be about 30% annualized growth. You know what’s crazy though? If Nvidia were to growth a full 30% per year for the next five years to grow its sales 5-fold, that’d give you $50 billion in sales. Throw a 3x multiple on that and you get — $150 billion, which is what Nvidia’s is worth right now. I don’t think Nvidia is going to go up another 700% for us like it has so far. But it still has some nice upside and is one of the most Revolutionary companies on the planet right now as it sells the leading chips into the AI, VR and Driverless industries.
  • AXGN Axogen (6) – When I first bought Axogen nearly just 2.5 years ago, I wrote, “With 80% plus gross margins, the company will do nearly $25 million in sales this year up 50% this year, growing another 30% plus next year potentially growing into $1 billion a year in a few more years. Axogen was worth this is a tiny market cap stock at about $120 million and should be considered a very high risk venture capitalist investment that will take 3-5 years to play out.” Well, here we are now and the market cap of Axogen sits at a cool $1.4 billion, up more than 10x since we bought it! Sales have grown more than 40% per year the last couple years and should hit $80 million this  year. But again, that means this stock has gone from trading at less than 5x sales when we bought in October 2015, to now trading at 30x sales today. I still think there’s potentially more upside in this name in coming years and that it could end up being acquired by one of the major players the industry, but valuation is stretched here!
  • SEDG SolarEdge (7) – Let’s run through Solar Edge’s valuation history too while we’re at it. When we bought Solar Edge a year and a half ago, the stock was trading at $15 which gave it a market cap of $800 million. Sales in 2016 were $600 million, so SEDG was trading at 1.3x revenues. Today, SEDG is at $53, giving it a market cap of $2.4 billion. Sales this year should hit $900 million, so SEDG is trading now trading at nearly 3x sales. Solar Edge is very profitable and could hit $70 or $80 this year as earnings reports come in. But let’s recognize that the stock is far from cheap now!
  • FSLR First Solar (7) – Solar’s still got tons of subsidies from the Republican Democrat Regime and around the developed world. I’m probably investing personally in more solar panels at my main property. First Solar’s the best of class in solar.
  • TWTR Twitter (7) – The biggest difference between Facebook/Google vs Twitter in The Great Data Crisis of 2018 is that Twitter’s probably not built around personal information entirely. Most people on Twitter are sharing articles or opinions or links or videos. Surely there are nefarious data controllings at Twitter too. But I tend to think it’s going to avoid the harshest scrutiny that Facebook and Google will rightly be receiving.
  • INTC Intel (8) – Intel’s been one of the best performing major tech stocks so far this year. Exactly as I’d expected when we started buying it last summer. Speaking of wacky valuations — do you realize that Intel is still down 30% from its all-time highs set back in the summer of….the year 2000! Intel’s market cap in the year 2000 was more than $300 billion and the company did just over $30 billion in sales that year — meaning it was trading at nearly 10x sales (just like Nvidia trades at 10x sales today). Today, Intel is worth $225 billion and will do $70 billion in sales, meaning it’s trading at just over 3x sales.
  • Palo Alto Networks (8) –Shoulda, woulda, coulda bought more Palo Alto every time I talked about for the last six months. Another valuation that’s stretched here though, as it trades at 8x sales.
  • VZ Verizon (9) – Verizon trades at 1.5x sales, pays a 5% dividend and is likely to control 5G in the US. I like this stock a lot here and will likely buy several more tranches over the course of this year.
  • Under Armour (7) – UA’s trading at about 1x sales these days. It used to trade at 10x sales, but we patiently waited until the stock had crashed nearly 90% from its highs of 2015 before we started buying it last year at $10.
  • BB Blackberry (6) – Blackberry’s got to deliver some real revenue growth if it wants its stock to go up. Revenue growth of just 10% this year and next would likely get this stock to $20. No revenue growth, and the stock will be below $10.
  • TST The Street (7) – TST’s CEO and its Chairman have done a great job of stabilizing the business and getting the company cleaned up. I do believe the company has turned a corner, and the market apparently agrees with me, as the stock has gone from 80 cents to nearly $2 in the last year since we bought it. Steady as she goes for now.
  • CALX Calix (7) – Calix could go up 10-fold from here if they win the Verizon contract and add a bunch of other major carries who just copy whatever Verizon bets on. The stock could drop in half if they don’t. This time next year, we’ll know the answer.
  • WDC Western Digital (8) – WDC’s trading at 1.25x revenues. But that’s because revenue growth is expected to be just single digits this year and next. I think revenue and profitability will likely be higher than what the rest of Wall Street expects here, and that could mean a stock that doubles or triples in the next year or two, if I’m correct.
• Primary short portfolio
  • S&P 500 SPY ETF (8) – Six weeks ago in the Latest Positions Round Up, I wrote, “I do expect more near-term market weakness and/or a sideways market for the next few weeks or months, and these will be a decent hedge in the case of a sell-off.” These SPY puts have turned out to be much more than a decent hedge, as the markets collapsed 10% after we bought them. I’ve trimmed almost have of these puts, locking in lots of profits, but they remain a hedge here for me.
  • DJIA DIA ETF (8) – Markets down 10% since we added these puts and I’ve been selling them down to lock in profits on the decline. Might add more puts with lower strike prices and later expiration dates, but sitting tight on these puts for now.
  • Nasdaq 100 QQQ ETF (8) – Big profits in these puts too and while I might add more puts with lower strike prices and later expiration dates, I am just sitting tight on these puts for now.
  • P Pandora (8) – Rinse and repeat: Pandora radio sucks. Their subscription product is worse. And the company’s trying to compete against Google, Amazon, Apple and Spotify. I remain short even when the stock hits new lows. I’m still short but might cover a little bit of this one soon, just to be disciplined and lock in some of these huge profits.
  • IWM Small cap ETF (8) – The IWM small cap index has been relatively stronger than the larger cap DJIA, S&P 500 and Nasdaq. I doubt that will last and I expect that the IWM will underperform the other indices over the rest of this year, regardless of whether the indices are up or down at the end of this year.
  • Biotech ETF IBB (8) – I’m planning to add to my Biotech IBB short sometime soon.
  • EWY SouthKorean ETF (7) – I’m not going to cover the EWY ETF just yet and I might actually short some more of it in coming weeks to get more hedge exposure.
  • HLF Herbalife (7) – Planning to cover this short and take my losses here soon.

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.

You can find an archive of Trade Alerts here.