Latest Positions: What a difference 90 days and a 20% pullback in the stock markets make

Last time I did a Latest Positions Update, in late September, I wrote this: “There’s a lot of momentum in this and other long-held Revolution Investments of ours, which is a function of how well they’ve performed in the last few months and years. Momentum money will rotate away from these names eventually, if only for a few weeks or months, even in a Bubble-Blowing Bull Market.”

Boy howdy, what a difference 90 days and a 20% pullback in the stock markets will make.

And this:

“The action in Nvidia and even moreso the action in its competitor AMD is reminiscent of the heady days of dot-com bubble. In 1999 and 2000, you used to see tech stocks go up 20% in a week and 200% in two months at a time all the time. These days its not just tech stocks, but its marijuana stocks and cryptos too and biotech stocks and…lots of signs of euphoria and greed all around us.”

Boy howdy, what a difference 90 days and a 20% pullback in the stock markets will make.

Here is a list of my latest positions with updated commentary and ratings for each position. My commentary is much less bearish than it was back when the markets were at their all-time highs in September. And so are the ratings, many of which went higher as prices have gone lower.

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 the office I work out of, some land and the ranch I live on in NM (8)
  • Physical gold bullion & coins (8)
• Primary stock exposure portfolio
  • AAPL Apple (8) – Apple went from being celebrated as the first trillion dollar company to being a battlefield stock in the three months. Remember all the times I explained to people that Apple was more of a sell than a buy when it was a trillion dollar market cap? I did trim some back then myself. Well, now that it’s down big from those levels and surrounded by fear, I do believe the stock is probably a good buy once again. That said, I’m still alarmed at the lack of improvement in Siri and Apple’s continued ceding of the Voice Revolution to Amazon and Google. The 1.8% dividend yield here is nice, but not exactly a reason to buy the stock either.
  • AMZN Amazon (8) –  In September’s Latest Position write up, I wrote this about Amazon and it still holds true today, even though the stock is down 30% from the levels it was at back when I wrote this last time: “I think AMZN might require patience for a while. As for the fundamentals, there’s no doubt that The Voice Revolution, Driverless/Drone Delivery, Robotics, Distribution, Advertising, The Voice Revolution and The Voice Revolution are kicking it.”
  • GOOG/GOOGL Google (8) – Though Google’s whole business model, much like Facebook’s, is all about collecting and using data about users, at least Google doesn’t seem to have been giving corporate partners random access to your private messages and what not. They better hope they haven’t been, or the stock will rightly get hit. All that said, the best reason to own Google here isn’t just how cheap it is and how quickly its still growing, it’s all about Android, Driverless, Cloud, AI, Voice, etc.
  • VZ Verizon (8) – Verizon, as I’d long hoped, has written off their stupid venture into content and are back to being a telecom company. AT&T, which I’ve long said is a great stock to short against our Verizon long, is probably still a short because they just spent another $100 billion on content with their stupid Warner Brothers acquisition. As for Verizon, as I wrote in the prior Latest Positions write up: “I’d probably put Verizon a 9/10 whenever it dips below $50 and it’s probably an 8/10 whenever its above $50. I still very much think that Verizon’s 5G can really create some upside to the company’s growth for the next five years. And even if not, I’m happy to own a defensive name with nearly a 5% dividend yield.”
  • Palo Alto Networks (7) – We trimmed some near its highs in October and bought some more back when it dropped right before it reported a strong earnings report three weeks ago. I’m holding tight for now. I’d love to be able to buy more of this, the best cybersecurity play out there, if we can get it below $160 again.
  • INTC Intel (7) – Intel’s got some momentum in the chip market right now and just might be in a position to take market share back from AMD and others over the next year or two. I like to buy Intel near $40 a share and would probably trim it above $55. This one’s not going to be a ten-bagger in the next five years, but it could be a five bagger over the next ten years.
  • FB Facebook (7) – I’ve sold parts of my Facebook holdings repeatedly over the last couple years to lock in profits. The endless barrage of news about how Facebook has violated its own privacy policies and misled regulators and users and so on belies how little care the company gives to privacy. The founders of both Instagram and Whatsapp have left Facebook in the last year was reportedly much about Facebook’s privacy invasions. The stock would spike 10-15% if the the COO Cheryl Sandberg were to step down and/or of if Zuckerberg gave up Chairmanship to someone the market trusts. In the meantime, the stock is quite cheap here and I’m likely to just hold onto my remaining shares because, as I wrote last time, “Looking out five years from now, I think FB will be quite a bit higher than its $160 quote, but looking out one from now, I’m less sure about that.”
  • NVDA Nvidia (8) – Nvidia’s highflying, over-loved stock is no longer quite so highflying and certainly is no longer over-loved. In fact, Nvidia’s starting to look pretty attractive as a buy here, so I ran it through my WiNR Ratio and WilPOWR Rating system this morning as I was writing up this analysis. The biggest risks to Nvidia, from a potential economic recession crimping demand to being caught in the crossfire of The Great Trade War of the 21st Century, are mostly near-term-ish in nature. Looking out over the next five years, I think Nvidia’s positioned to extend its dominance in AI, Driverless and other Revolutionary sectors. I wouldn’t rush into the stock all at once, but longer-term Nvidia’s looking quite attractive from these levels.
  • SNE Sony (7) – We trimmed some near $60 a few weeks ago. Now the stock is back below $50, the stock is still up 4x our original purchase price. With a P/E of less than 10 and still trading at less than 1x sales, the stock is cheap. But with little to no topline growth to speak of, the stock isn’t a screaming buy either. If SNE doesn’t grow revenue more than 5% in 2019, I’d be likely to move on from this stock.
  • SEDG SolarEdge (7) – Solar Edge has gotten to be cheaper too, as the fundamental picture here has remained strong while the stock’s come down hard. If the company reports another strong quarter in its next report, the stock could be off to the races. This is yet another one that I’ve trimmed many times over the years while we’ve owned it and I’m not ready to buy more shares back just yet.
  • TWTR Twitter (7) – The stock has been one volatile puppy the last year and it will probably remain volatile for the next few years. And yup, we took profits on this one a couples since we bought it in the mid $14s and nope, I’m not ready to buy more yet. “Longer-term I think Twitter can put up 20%+ growth on the topline for the five to ten years, assuming single digit user growth. The company will get better at monetizing each user on the platform and I expect daily usage per user will grow 10-20% per year for the next few years too. That makes this stock a pretty attractive buying opportunity as its gotten back into the $20s.”
  • GLD (8) – In the prior Latest Positions Update I wrote, “I’m an opportunist with my portfolio and am always willing to make a short-term trade if I see a good opportunity with favorable risk/reward. I do think, for example, that gold and GLD are probably going to be up 20% from these levels over the next year. Three primary reasons why. 1) Rotation from cryptocurrencies to gold as The Great Cryptocurrency Crash continues. 2) Geopolitical tensions are on the rise and a year from now I think the odds are that geopolitical tensions are even higher. 3) The gold/GLD chart looks awful and sometimes that’s the best chart to buy.” The gold/GLD charts don’t look awful anymore as we darn near caught the bottom in gold while everybody else was buying the top in stocks. Holding my GLD steady for now.
  • AXGN Axogen (7) – I’ve probably trimmed my AXGN, which we originally bought at less than $5 per share, at least half a dozen times while we’ve owned it as it rallied into the $50s. I kept explaining that the stock, no matter how good business has been, had no business trading at like 30x next year’s sales. Sure enough, the stock came down into the $20s, when earlier this week, a strange but very detailed short hit job report was released on Seeking Alpha. The report was written a company calling itself “Seligman Investments” which sounds similar to an old investment bank called JD Seligman. As I read the report Tuesday afternoon, I kept waiting for the “smoking gun” but there isn’t one. There’s a ton of things that any Axogen investor should be worried about, like the fact that the company has so far been a monopoly and that some day competitors might come into the market. Or that the company might not actually generate billions of dollars in sales of its flagship nerve connection product in another decade. The report hinted that there could be fraud in Axogen’s numbers, but again, didn’t really come out and say there is. And I don’t think there’s any fraud at Axogen. I called up my hand-transplant surgeon friend of mine (who also happens to serve on my hedge fund’s advisory board) and discussed the bullet points from the short hit job report. He thought it was laughable that a competitor could come into the market any time soon or that a regulator could ever pull Axogen’s flagship products from the market because he and other surgeons depend on them. Getting back to Seligman Investments, I found that there was no bio or even a profile picture on the company’s Seeking Alpha page so I sent an email to the Editor In Chief of Seeking Alpha (who just happened to have been my personal editor back at TheStreet for many years). He’s looking into why there’s no bio or pic for Seligman Investments. The fact is that if this short hit job report had been published six months ago when stocks were in Bubble-Blowing Bull Market momentum mode, I doubt it would have hardly hit Axogen. As it is, I expect that Axogen will continue to grow revenues 40% or so per year for the next few years. With the stock now trading at “just” 5x next year’s sales estimates, it’s looking like a pretty good buy here. That said, it’s not screaming cheap like it was when we first bought it years ago, so I’m not in a rush to buy any shares back just yet.
  • UA Under Armour (7) – I’m growing impatient with the company’s turnaround here. We’ve got some nice profits on this name still and I might just lock them on and move on. The thing that keeps me in it is the analysis I wrote three months ago: “This is a stock that’s expensive on a price-to-earnings basis but cheap on a price-to-sales basis. That’s because it’s a turnaround that’s trying to get their earnings back on track after stumbling in 2016 which gave us the opportunity to buy this stock with a $10 handle. Analysts expect mid-single digit growth for the topline this year and next, even as they expect earnings to double from 17 cents per share to 33 cents. Normalized earnings for UA are probably close to $2 per share if they can truly get their inventory cleared out and roll out a hit product or two. The stock is sort of in no-man’s land right now, neither a great buying opportunity nor one that looks like it’s about to pop higher. Steady as she goes because looking out three or five years, this stock could be back near $50.”
  • TST The Street (6) – The Street sold another subsidiary for much more than anybody (but yours truly) thought it was worth. We bought this stock when it had a $30 million market cap and had $35 million in cash. The company has sold one company for $30 million and this latest one for $80 million cash. The company now has $120 million in cash and the market cap is still just $100 million even after the stock has tripled from the lows where we bought it. That said, the CEO David Callaway, a large reason of why I bought the stock, is leaving after this latest sell closes. I spoke to David about it and he explained his reasons for leaving and what can anybody really say about that except that I’m probably not going to hold onto the stock long since he’s leaving. The stock should trade closer to the $120 million in cash they’ve got but without David, I’m not sure I’ll hold on to the stock much longer either way.
  • SNAP Snap (8) – I’m probably going to ride my SNAP for at least two more quarterly earnings reports. I’d like to see if the company can benefit as the only viable non-Facebook-owned social network in the US.
  • CALX Calix (7) – This one’s just a binary set up. If they win a bunch of Verizon and other 5G contracts, the stock will go up a bunch. If not, the stock is likely to drop 50% from these levels. With a 30% plus gain on this tiny position, I’m just sitting tight.

• Primary short portfolio
  • Nasdaq 100 QQQ ETF (7) – In the prior Latest Positions Update, I wrote this about our hedges: “Our hedges served their purpose, I suppose, as they helped keep the portfolio hedged a bit at the highs. I’m likely to nibble a few more puts in coming days or weeks when markets rally.” Boy howdy, what a difference 90 days and a 20% pullback in the stock markets will make.  I’m selling the last of these index puts for now but am likely to roll a little money into some lower strike priced puts if the markets rally a 5-10% here in early 2019 as I expect they might. Cash is better than puts for most investors right now.
  • AMD (8) – No longer in the portfolio, as I sold the AMD puts for big profits. But I just wanted to share what I’d written last time: “The momentum in this name is in overdrive and the stock is parabolic.” Boy howdy, what a difference 90 days and a 20% pullback in the stock markets will make.
  • S&P 500 SPY ETF (6) – See QQQ write up above.
  • Biotech ETF IBB (7) – Last time I wrote, “There’s a lot of momentum in biotech right now and there’s probably a pocket of air underneath many biotech stocks.”Boy howdy, what a difference 90 days and a 20% pullback in the stock markets will make.
  • EWY SouthKorean ETF (6) – I’ve kept this short on for a long time, just sitting there. Probably time to move on as its just not a big position for me and I will be cleaning up my portfolio a bit here.
• Cryptocurrencies/tokens
  • Bitcoin (6) – I’ve owned bitcoin for years and have sold most of my bitcoins but still hold some. I think there’s more near-term crash ahead for bitcoin and most any cryptocurrency but that bitcoin could be a survivor/thriver long-term.
  • Stellar Lumens (7) –This is a big concern, probably the single biggest concern I have about owning the Stellar Lumens. I’m increasingly convinced that the Stellar platform is going to be big in The Blockchain Revolution, but I’m less sure about if the Lumens will function as a store of value currency from these current levels. That said, I just started buying Stellar Lumens recently and I’m likely to nibble a few more soon even though I think there’s more near-term crash ahead for Stellar Lumens and most any cryptocurrency but that bitcoin could be a survivor/thriver long-term.
  • Ethereum (6) – Holding the tiny bit that I own.
  • Ripple (6) – Holding the tiny bit that I own.

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.