Market momentum, Black Swan watch and Webvan
Hi folks, I’m here, so let’s get started! Ask me anything.
Q: What do you think of the choppy market action lately? Seems like it has been hard for anything to get any sustained forward momentum. Temperature of the market seems to be changing.
A: Not sure I agree with you about the market not having any sustained forward momentum. With mega caps like our largest holdings Facebook, Apple, Amazon, Google, all powering higher and the Dow Jones Industrial Average itself at all-time highs again this morning, there’s been a lot of sustained forward momentum. I do think the markets are ripe for a 5% pullback and am hoping we get it, but we’ll see.
Q: Is there anything on the political or economical horizon that you think could precipitate a Black Swan event?
A: What we will hear about as being potential Black Swan Events in the headlines in coming weeks: “Budget impasse could shut down government and crash stock markets!” “Dollar’s action could spell doom for stock markets!” “Trump and the chaos at the White House could crash the stock markets!” What might actually crash the stock market? Exogenous event like a new war with North Korea. Maybe some sort of downturn in real estate around the world? Perhaps a spike in sovereign interest rates and municipal bond rates? Maybe some sort sudden run on the banks in Germany? Probably something that the headlines will panic over and that I haven’t listed here because it’s not hitting yet would be the most likely Black Swan. Doing my best to make sure we get out ahead of time though.
Q: While letting go recently of a hedge or 2, might there be impetus to roll into another?
A: Yes, definitely.
Q: If the market continued to buy $AAPL today, I would hold to see if it runs. But as you just said, the action in the market has been choppy, and the dam could form some leaks sometime soon. Might as well take some profits, since I have been looking to lighten my $AAPL position for some time now! 🙂
A: “Thinking of raising some cash today, using today as an opportunity to reduce my Apple position as I have been wanting to do.” Yes, I think it’s a great time to trim some Apple especially if it’s too big of a position for you.
Q: Cody, at what level would you start a position in Amazon?
A: If I didn’t own any Amazon at all, I’d nibble a 1/3 position right now to get started. I personally will look to nibble on some more Amazon near $950 or maybe sooner and I’d be aggressively buying more Amazon below $900 if we get the chance.
Q: I know you’re doing a currents positions update, but are you still thinking Nvidia is still a solid 3-5 year hold? Of course, with some prudent trimming along the way.
A: Surely you know I’d tell you if I’d changed my mind on Nvidia! But the answer is yes, I still think it’s a good stock for the next 3-5 years.
Q: On a personal note, how’s your arm doing?
A: Stupid arm is still in a splint, but I’ll get a X-Ray and sent to Dr. Shores later this week for an update.
Q: Any new thoughts on Impinj? What are your feelings on Applied Optoelectronics Inc? What are your feelings on Ichor Holdings Ltd?
A: Impinj will have new analysis in the Latest Updates. I’ll hit on AAOI and ICHR in the book or soon after I finish it.
Q: At what price do you become aggressive buyer of Google?
A: I might buy more Google around $900 or slightly lower. Aggressively maybe at $800.
Q: I would like to throw Coherent, Inc. into the conversation too, am wondering if the pummeling it is taking today presents a good opportunity.
A: I’m quite intrigued by Coherent, Inc. here. The estimates are for 99% top line growth this year and earnings are supposed to jump from $4 this year to $12 next year. I like the idea that Coherent, Inc. might be a stealth play on batteries as their lasers help make the batteries…have to dig further tho, as I’ve been so focused on The Voice Revolution lately, I’ve not looked at Coherent, Inc. in a while.
Q: Do you think that the semiconductor tool manufacturing group, LRCX and AMAT for example, are going to play out any time soon? Like this year?
A: I think the semiconductor manufacturing group still has another year or two of big demand as the major semi companies are well-funded, profitable, growing and low on inventory and high on prices.
Q: Would you be a buyer of DRYS DryShips here? Just kidding. I crack myself up.
A: I think it’s time to back the truck up on Webvan WBVN. Haha!
Q: Was the WebVan comment also a just kidding remark?
A: Yes just kidding — Do NOT buy DryShips or WebVan! 🙂 But — I hear grocery delivery is going to be big in the Internet age and Webvan has a lock on it! 🙂
Q: Never heard of the stock before.
A: I wrote this a few years ago about Webvan: “One of the biggest busts of the Web 1.0 illustrates this perfectly. WebVan started in the late 1990s to deliver fresh groceries to customers within 30 minutes. To borrow Web 2.0 parlance, it was Domino’s for groceries. It’s a pretty cool and disruptive idea, and the technology might not have been quite ready, but the real thing that killed WebVan was the reflexive cycle of investor expectations—spending that VC cash to ‘grow’ as quickly as it could. Even the future TBTF crowd was in on WebVan–then Goldman Sachs CEO Hank Paulson was one of their most prominent backers. And here’s how WebVan responded to all that pressure. Per Wikipedia via CNET: While Webvan was popular, the money spent on infrastructure far exceeded sales growth, and the company eventually ran out of money. For example: Webvan placed a $1 billion (USD) order with engineering company Bechtel to build its warehouses, bought a fleet of delivery trucks, purchased 30 Sun MicrosystemsEnterprise 4500 servers, dozens of Compaq ProLiant computers and several Cisco Systems model 7513 and 7507 routers, as well as more than 80 21-inchViewSonic color monitors, and at least 115 Herman Miller Aeron chairs (at over $800 each).”
Q: Thanks for the Q&A…now go take care of yourself ;). And thanks for having our backs… no pressure, but I’m counting on it!
A: Thanks for the kind words (and adding to the pressure I feel).
Thanks all, great Q&A! Talk soon.
