Not Investing In Endless Undeclared Wars, Tesla Phone, Solar Stock Crash, And More

Here’s part 1 of a lightly edited transcript from a 1 hour and 20 minute long zoom Trading With Cody Q&A. You can also watch the full video version of this by clicking here.

Cody Willard:
Welcome to an almost impromptu version of a Zoom weekly Q&A chat because GoDaddy’s failed to protect my website and it is now not up right now. I was just talking about the fact that I can’t move my website from GoDaddy easily because even though it’s built on WordPress, which is a very standardized, probably the de facto standard for building a content website (a content management system, CMS) and WordPress is the largest there is, and it should be easy to move from one server to another.

I would love to go to Amazon Web Services and join the 21st Century and not be on GoDaddy’s 20th-century crappy system. But there’s a problem called lock-in. Well, switching costs are created so I’m locked into GoDaddy because it’s actually hard to migrate any website to another server, because things can go wrong, you can lose images, it’s a nightmare.

Moving from one server to another even on something as standardized as a WordPress platform is never smooth. And because of that, GoDaddy has locked me in. There are high switching costs and risks associated with moving. I want you guys, if you’re interested, to read a book that is, I think, the most important book you can read as a revolution investor. I’ve talked about it before.

It is Information Rules by Hal Varian and his, at the time [inaudible 00:02:09]. Hal is now… or I don’t know where he is at this moment. Subsequently to writing that book, he became head of strategy over at Google. But the book I read in 1998, ’99 maybe, and it talks about a lot of the stuff that you hear me look for when I try to find a great revolution investment. And that is you want it to be a platform. You want there to be a lock-in. As an investor, you want lock-in, as a consumer, you don’t want it.

The book talks about critical mass, lock-in, switching costs, the platforms, standardization of protocols. Screwdrivers are standardized, right? You got a Phillips and a flathead, and then you’ve got other various kinds, but even those are standardized. You get the right tool and the screw works.

So, you have a critical mass of screwdrivers that work together and screws that work with your screwdriver. These things are important, and you can apply that to technology. Apps, you got basically two apps. The two app platforms: Android, iPhone. And you build an app and then consumers can use that app.

And of course, the apps try to lock you in. Make it high switching costs. You get all your data put together on your Google Fitbit. So, you get all your data locked in on Fitbit, and then you don’t want to leave Fitbit. There’s a switching cost to go to the Apple Watch.

So, anyway, you see these principles in that book called Information Rules over and over in all of business, all of society. And to figure out how to find companies that leverage those principles in a business way, you end up with investing like we have in Apple at 20 cents, Google at the IPO, Facebook after it came public, et cetera, et cetera, Bitcoin back in the day. Back in 2013 when we bought it.

So, those principles are applied every time I analyze anything. Read the book. Let’s do Q&A.

Speaker X:
What do you think about Bitcoin at this point? Is this a lost cause or should we buy some more right now if we recently bought some despite your warnings?

Cody Willard:
Oh, bitcoin’s not a lost cause, but look, I don’t have much new to add, right? For the last year, I guess I’ve probably been pretty bearish on crypto, in general. I haven’t sold my Bitcoin personally. I own a little bit of Bitcoin futures in the hedge fund, but those are a hedge against my short Ethereum futures bet, as well as I’m short some of the crappy crypto stocks, Bitcoin stocks like…

I hate talking about shorts to my Trading With Cody subscribers because as a professional hedge fund manager, it’s important and most of the time necessary to have some short hedges on. But in my personal account, I usually don’t, and you can lose infinite amount of money shorting a stock that goes up infinitely. Like say if you shorted Apple at 20 cents to me when I was buying it, you would be completely wiped out along the way, so be careful with shorts.

But I am short some of the crappy crypto stocks. I think crypto is… The natural market has to wipe out 19,000 out of 19,000 and something cryptos. There’s going to be a few hundred that are probably good. I do think my SKTL space debris cleaning crypto will be a crypto that makes it long-term, surviving and being something valuable in the future because it is built on a virtuous, open, no silliness, no fraud. It just is what it is and it’s open and transparent and it does a social good. And I think there can be cryptos that will come along.

The next iteration of cryptos, the next generation of cryptos will have trillion-dollar market caps. And I think Bitcoin will also get back to a trillion-dollar market cap along the way. But before that happens, I think, for example, we need to see some of these silly fraudulent stupid cryptos that are still worth billions of dollars, Bitcoin won’t bottom until those silly fraudulent stupid cryptos are worth less than my SKTL space crypto.

SKTL space debris cleaning crypto right now has a market cap of about two or three million, maybe four million dollars total. Liquidity total if we released every token, which it won’t. It takes time to release and print those other tokens, which are printed on space events to help clean up space debris, which those space events might cause.

So, there will be great cryptos, but I don’t think Bitcoin and/or the crypto winter bottoms until those billion-dollar silly stupid fraudulent cryptos are worth millions of dollars instead of billions of dollars and/or even just completely at zero. And I think…

I’ve been trying to figure out where is zero for something that recently had a 50-billion-dollar market cap currently… A crypto that had a 50-billion-dollar market cap and it’s currently a three-billion-dollar market cap. And it’s down 95-97%. Is that zero? No, the thing is still worth billions. When it’s just worth a handful of millions, that’ll be sad for all the people that are in it, but it will probably be part of the process to getting Bitcoin at the bottom.

Speaker X:
But does it make sense to sell it as-is and to buy it at a lower price or is that just gambling or… I don’t know.

Cody Willard:
Yeah, I don’t know. Look, I just laid out a broad strategy for how to handle it in a hedge fund, but as a personal investor, I guess all I can do as usual is tell you what I’m doing personally. So, I sold all my Ether a few months ago or a few weeks… I don’t remember when it was. I sold all my Ether, I sold almost everything but…

I sold basically every crypto I had except for Bitcoin, Helium, and SKTL, my space crypto. I still hold the Bitcoin that people bought trading 30 subscriptions with back in 2014. I still have a Bitcoin or two that I bought in 2013, but I’m certainly not buying any right now and I’m not selling the ones I’ve got because, again, I do think Bitcoin is a de facto winner in crypto. But I don’t know what to tell you.

Speaker X:
Fair enough.

Cody Willard:
Feet to fire, I wouldn’t want to own a Bitcoin even right now unless your cost base is really, really low and you’ve just owned it for a long time. But I don’t know… We’re talking about gaming a cryptocurrency, which I’ve always explained is really hard.

I mean I don’t know, you can’t use charts on this crypto stuff. There’s not enough history to figure out the technical analysis and are there enough people in that market already to make those charts meaningful? Because the group is moving together and there’s no new people getting into the group of crypto investors, which would alter the technical analysis that people think they’re doing on crypto.

So, I don’t have a good answer for how to trade crypto. I can just tell you that I do think… I don’t know a good answer on how to trade Bitcoin, but I do think most any other crypto is in trouble.

Speaker X:
Thank you.

Cody Willard:
Ether is not going away, but I think it’s got a 90% downside even now. It’s already down 75%. I think it’s got more. Maybe another 75%, let’s call it that. So, at 1,100 bucks my 75%, let’s call it 300 bucks. That’s the target maybe. Next question.

Daniel:
Hey, Cody, I’ve got a question for you here. How do you feel about Tesla with their new phone that they’re trying to come out with? Do you think that’s going to help them, hurt them?

Cody Willard:
I do not believe that there will be a Tesla phone. Who the hell knows though? It’s like Apple supposedly getting into the car business for the last 10 years, and if you guys have been reading me every time I’m asked about that, I’m like, “I don’t think Apple’s really getting into the car business.” And they still haven’t.

I don’t know, Elon might be… Another lesson from that book Information Rules is subterfuge and vaporware and making people think you’re going to do something you’re not going to do. It’s the same thing, Elon talks about Tesla’s going to get into mining to truly vertically integrate, and maybe they will.

But I don’t think that would be any time soon if at all, and I think it’s more Elon making the boards at Ford and GM sit around going, “Should we get into mining too? Oh, I don’t know. We better spend some time exploring that idea.” And then he gets them distracted and then they can’t figure out how to make a EV that actually works after 50,000 miles.

So, I don’t know. I don’t think there’s going to be a Tesla phone. Can you order it? Can you go on tesla.com and order it? If you can’t, then I don’t believe it. Shall we do it together? Tesla.com. Nothing here under the… All right, I’ll share my screen.

Daniel, am I answering your question, and/or do you have a rebuttal? Would you like to debate that Tesla… Are you like, “No, man. Cody’s wrong, they’re definitely doing this.”

Daniel:
So, yeah, I would debate that. I do think they are doing something over there. To me, it’s like the iPhone 14. Can we go order that right now, but we know it’s coming kind of deal? Just the implications of a phone being able to connect to Starlink just seemed worthwhile. It seems worth pursuing. It would change the game totally.

Cody Willard:
Well, then why would it be a Tesla phone and not a Starlink phone?

Daniel:
That’s a good point. I would say that would be the way it should go.

Cody Willard:
I don’t know. It’ll be interesting. I mean the one thing we do know about Elon is he’s mercurial. Let’s google mercurial. Next question. Look, and by the way, if they roll out a phone, I would expect it to do better than the Amazon Fire phone that failed.

What was I thinking today? Earlier today I was thinking about someone’s the Handspring of something. You guys remember Handspring? These were real stock symbols and then I’m not going to finish the thought. PALM. RIM, PALM, and HAND. Yeah,, Handspring, PalmPilot, and Research In Motion, also known as BlackBerry. You guys finish the joke, I’m not finishing it. I’m too classy for that. At least I’m wannabe too classy for that. Next question.

Wes:
Is there a question queue?

Cody Willard:
Oh, the Cabana Crypto man. What is up, Wes? Good to see you.

Wes:
What’s up brother? How are you doing?

Cody Willard:
Your lighting is terrible. All we see is the beautiful sky.

Wes:
I know, I know. I’m about ready to depart to the next Airbnb, so there you go.

Cody Willard:
Nice, you’re out living large. What’s the question, my friend?

Wes:
So, I was in Pittsburgh a couple of weeks ago and just met… I call them the solar bros. Just random dudes I’d never met before out at a bar, but they work in, I guess… They’re equipment supplier for the solar industry, so I was like, “Oh, you guys work with SolarEdge.” They were like, “Yeah, they’re one of the biggest guys that we do.”

I was like, “Is there anything that I’ve never heard of?” Or I’ve heard of SolarEdge, obviously, but I was like, “Are there any other companies out there?” And they were like, “Well, we can’t own stock in them just because we’re too close to the situation and stuff like that.”

And then I was like, “So, nothing?” And then they both looked at each other and looked at me and they were like, “Enphase.”

Cody Willard:
I knew that’s what you were going to say. I knew it.

Wes:
Okay. So, I just figured I’d ask you about it.

Cody Willard:
Yeah, look, man, Enphase is tough. I’ve done work on it and originally, I thought they were crappy and in trouble and maybe even not being all up above board. But the same thing. Enphase seems like in the industry it’s well respected, it’s a good company. Let’s just do some valuation work on it real quick, what do you say?

Wes:
I think when I checked it this morning, it was like 26 billion compared to SolarEdge’s 15 or something, but I’m not sure if that data was accurate.

Cody Willard:
No, that probably is, and look, there’s a discount on SolarEdge because it’s based in Israel. A non-US discount as most every other country probably always should have. Israel is pretty good at enforcing rule of law compared to most other non-US countries, but still, there’s a discount for being over there. Even just the risks of war in Israel is higher than in the US. So, there should be a discount.

But let’s just look at the actual valuation here for a moment. Enphase. Actually, I’m curious about the… Look, I’m going to do something right now, and I’ve been telling you guys don’t do this, but I’m just curious. I want to know what the 52-week high is. It’s irrelevant, I shouldn’t even… I’m not going to look. I’m not. I’m going to be disciplined. I don’t care where the stock came from.

That is an important… It’s hard not to care because we’re sitting here. You can find almost any technology-related stock. It’s down 50 or 70, 90%. You’re like, “Thing’s on sale, better go in there and buy it.” No, don’t look where it came from.

We were in the greatest asset bubble of bubbles of all time. The bubble-blowing bull market of 12 years took it all to unheard-of levels, so it’s irrelevant. Let me get back, and actually, I’m not looking where it came from. I’ll share my screen.

All right, here we go. Enphase, see, I’m not looking. There is no chart, there is no 52-week high. None of that’s on there. Here we go. Last 12 months 1.5 billion dollars in sales. The market cap as Wes just mentioned I saw is 26 billion. So, 18 times sales.

I can almost stop right here. 18 times sales, that’s really expensive. I mean if it’s got 99% gross margins, that’s not too bad expensive, but if the margins are, as they are in solar, less than 50%, your cost revenue’s 900 million, your revenue’s 1.5 billion, so 40-45% gross margins.

So, it’s going to be hard to get that through. I could do it on my spreadsheet here. You guys have seen me share this spreadsheet before. Let’s just do a little work here. Insert rows five above. Let’s go copy this, paste it here. I’m not going to do the whole thing, but we’ll just sort of run Enphase through and I’m going to guarantee because I just looked at those numbers that it’s going to end up having the PP five years out. Price to profit it’s going to be pretty expensive I would almost guarantee unless the top-line growth rate is huge. We’ll go back over and look at that in a second next.

All right, current year 1.5 billion. Top line growth rate, let’s go see what that was. Where was my thing? Is this it? Yeah. Go over here and look at what the analysis is, and then we’ll take a little bit off.

50% growth, 30% growth. I will tell you those are impressive numbers relative to what most companies are doing at this moment. I like seeing that. Just for example, let’s see what SolarEdge top-line growth estimates are. 55 and 25. Similar, similar. Basically, the same.

So, let’s go back over to my spreadsheet. We’re going to make 25… It’s not quite conservative. If I was going to try and make this really conservative, I would do 20% right here for the top-line growth rate. But we’ll call it 25%. Still taking less than the last two years. I’m going to have to put 20% to be conservative. I just can’t do it. I can’t leave it at 25.

All right, so Enphase here, year three revenue is then expected to be 2.59 year five. You guys can see I just basically put an equation here. It takes this year, compounds it by the growth rate and straight math.

Gross margin we just said was, say 45%. So, the profit here is going to be 1.68 billion in year five. Now, let’s go look at the top-line growth rate. Now, we’ll go look at operating expenses. Come over here where we’re… financials. Operating experience call it 400 million, which will be .4 in my billion-dollar baseline.

So, we’re coming out… I knew it. 30 times five years out profit. You can buy Shopify at 10 times five years out profit. Again, making a lot of assumptions. I don’t know that Shopify is going to pull it off, but using conservative estimates based on what the analysts currently expect.

Qualcomm’s eight times five years out. Facebook is nine times five years out. Let’s see if we can find anything more expensive than Enphase. Netflix. Netflix is 32 times five years out estimates. Here’s one, Workday, 47 times. DocuSign, 83 times. Snow is 543 times five years out profits.

So, 30 times out, five years out profit keeps me away from Enphase. I’ve been mentioning that I think solar stocks in general, like much of the market, are on the other side of their very own bubble-blowing bull market that popped. Has gone kaploo and now we have to find the bottom in solar stocks.

I doubt that it is at 30 times five years out profits, otherwise known as 18 times trailing 12-month sales. I don’t think that’s the bottom. In a bull market, that might work just fine. I don’t know that there’s a bull market. I’d love to buy Enphase at half this price. It’s a good company-

Wes:
Thank you, sir.

Cody Willard:
… and if you want to take a risk here, I could see it.

Wes:
I appreciate the feedback. If you have time, I’ll leave one question in the chat. I don’t want to take up anybody else’s time, so if you have time to get to it, awesome. I got to get out of here.

Cody Willard:
Are you not joining us for the SKTLs call today either? Next week when you’re back from your-

Wes:
I might be able to do it. It just depends upon the signal.

Cody Willard:
All right, it’s the same link that I just sent out. Again, if any of you would like to join the SKTL space debris cleaning cryptocurrency volunteer Zoom call, we have a team of 20 or 30 people at this point that show up, maybe 10 to 15 show up on an average week. If you’d like to come, it’s the same link I just sent out, 4:00 PM every Wednesday. Love to see you there, Cabana Cryptos. I mean it’s in your name, dude. It’s in your name.

Wes:
That’s right, man. Hey, I have plenty of Skittles, so-

Cody Willard:
Amen.

Casey Ward:
Hey, Cody. It’s Casey Ward. How are you doing?

Cody Willard:
My man Casey Ward. Are you still flying?

Casey Ward:
No, sir. I retired.

Cody Willard:
Thank you for serving.

Casey Ward:
Thanks, buddy.

Cody Willard:
Grew up with Casey, and as you guys know, I give Trading With Cody subscriptions for free to any active military or police officer. And Casey served for a while.

Casey Ward:
We appreciate it. So, hey, man, I’m thinking Ukraine issues. How are you feeling about defense sector and then also agricultural futures as it applies to just the security sector overall, and then also for agricultural futures due to the reduction in grain in Europe.

Cody Willard:
First one first, security. Interestingly, when you asked my first thought was, “Oh, yeah.” With my website today… I’m not a conspiracy theorist, okay? But it would not shock me if Russian state-sponsored hackers got into GoDaddy today. That would not shock me that that is the problem going on over there at GoDaddy that’s made my website go down.

So, security, in my mind at first, I was like, “Yeah, man.” Cryptography and cybersecurity are in a big growth phase and probably more important than ever as a result of Russia’s state-sponsored hacking programs. And that would be even in a time of quote-unquote peace, much less outright war between EU and Russia.

Has the EU not declared war on Russia yet? They have not. Guys you know I’m very anti-Republican and Democrat. I don’t like Trump or Biden. I didn’t like Bush or Obama. The point being that I saw Biden telling people that gas stations are causting inflation…

First of all, it didn’t make any sense. He wanted mom-and-pop shops not to make profits on their gasoline. Gasoline that it’s not very profitable for a gas station anyway.

But point being he’s like, “This is a time of war.” When was the last time the United States actually declared war? But somehow, we’re in all these wars. This is why I do not like Republicans and Democrats. Yet again, yet another reason I do not like Republicans and Democrats because apparently, they can bomb people all over the world without declaring war.

And now we’re sending people/governments that might or might not truly be on our side, and which probably are very corrupt — we’re now sending them very advanced weapons and money, and… Certainly, there won’t be any unintended consequences from our actions on this Russia-Ukraine development, debacle, war, right? Gimme a break.

It’s just the fact that in the EU or the United States, nobody’s willing to call a spade a spade. If we’re at war, then declare f’ing war. If we’re not, then don’t f’ing send them money and weapons. Pick it, make it be real.

So, this war is not good for the United States, it’s not good for Europe. The security companies you’re probably actually asking are not cybersecurity related. You’re asking about Lockheed Martin and L3Harris and these giant defensive conglomerates that are fully engaged in the military-industrial complex that is causing all of these wars without war.

And I ain’t touching them. They’re probably in great position for the next five or 10 years because the Republican-Democrat regime will continue to fight war without declaring war. And the Republicans and Democrats are probably going to send lots and lots of these companies’ weapons to governments that are not our own. Governments that were put into place through systems that are even more corrupt than the Republican-Democrat regime system.

None of it’s good. Grand scheme of things though — things usually work out for the United States, and I think they will again this time. This discussion made me emotional. I’m actually shaking by talking about all of this that vehemently.

Food prices. Look, I think a lot of inflation in the food is already… The prices are probably already as high as… They’re in the realm as high as they’re going to get. We might go a little bit higher. I don’t think we’re going to double the price of wheat again, things like that. I think we’ll probably see some slowing of inflation and then there are going to be deflationary cycles in everything but food.

The one thing about food that is always a truism is that it’s even beyond a pure commodity. Energy is a pure commodity because you can substitute lots of different energy units. It doesn’t have to be gasoline, it doesn’t have to be solar, it doesn’t have to be wind. It could be any of those.

Food, you can even do more substitution. So, if grain prices continue to double, triple, whatever, go through the roof, alternative energy units for the person, I guess that’s what food is anyway, right? It’s still just fuel. Food is pure commodity in the same way fuel is. All right. Yeah, all right.

Anyway, there’s a lot of substitution that can go on just about anywhere that’s not a developing country. The tragedy is going to be the starving people in Afghanistan, Africa, Middle East, Asia, Central America, South America, inner-city, rural America. Poor places. Really poor, poor places where people two years ago hoped they could get milk for their cereal or meat for their rice meal that night. Some sort of any kind of protein.

That’s where the impact of all that is probably going to be felt much more than say in the United States stock market. The collective buying power of the bottom two billion people who are going to be the ones hungry and suffering — Hungrier and suffering even more than they were two years ago — their collective buying power probably doesn’t move the needle on the stock market the way five million rich Americans move it.

And so, as an investor, I wouldn’t worry too much about the inflation in food. As a human being and as a citizen of the world, it’s tragic and awful. And of course, as I mentioned on Twitter the other day, if you’re mad about spiking inflation in food and grain, why are you okay with the Republicans and Democrats paying farmers billions of…

Not just farmers, mostly giant conglomerates that own farmland, paying them billions of dollars in welfare every year to not produce more food so that food prices are elevated. Stop voting for Republicans and Democrats because that’s what they do. Next question.

Speaker X:
Hi, Cody. Good morning. I’m sorry to hear about the GoDaddy mess up. I have one question. I want to start a new portfolio that can provide steady growth over the number of years. I don’t want to use individual stocks for that profile. Can you please suggest a mix of ETF, mutual funds, et cetera that would be well-balanced across various sectors, domestic, international?

I want to put a fixed amount in there and invest every month.”

Cody Willard:
I’m a hedge fund manager and a stock picker, and certainly, I talk and advise… Not even advise, but I talk strategy with you guys, and I try to help guide. But to get down into those weeds and to give you the specific ETFs and mutual funds and the profile that you’re trying to put together, risk-reward scenario is… You would need to pay me a lot more than the Trading With Cody subscription fee for that. You need someone that can really sit down and go through your profile.

I mean I do a service. I haven’t done one in a while, a deep-dive analysis service, and I actually have my friend Michael Dudman that I’ve talked about before. He’s a retired stockbroker branch manager from Merrill Lynch and he’s doing some stuff like that. I could put you in touch with him.

Tell you what, will you shoot an email to support@tradingwithcody.com? Just copy and paste your question right there and I’ll get you put in touch with someone who can help guide you with some answers that you’re looking for.

Speaker X:
Thank you.

Cody Willard:
My first boss on Wall Street, Andrew Lanyi, Hungarian Soviet war camp survivor, used to say, “Cody, there are three answers to any question. Yes, no, or I don’t know, I will find out.”

It’s always better to say I don’t know than to try to… I could throw together a quick answer on some ETFs and stuff, but let’s not do that. Let’s let someone who spent real time and energy figure that out. Just say, “I don’t know,” when appropriate.

Oh, my goodness, look who just came into my office! My wife and daughter did not know that Trading With Cody were down.Let me see Amaris. Everyone’s going to have to say hi to Amaris.

Oh, hi, hi, hi. Hi, honey. Hi, Amaris. Look at this. Oh, my goodness. I’m just doing a Zoom call. You’re on Zoom. Let’s get a big view of you. Speak everybody. Look at you, do you see yourself?

Speaker X:
Hello, Amaris.

Speaker X:
Hi.

Cody Willard:
Say hi, everybody.

Speaker X:
Hello.

Speaker X:
Looking great, Amaris.

Cody Willard:
Everybody, come on, she likes voices. Hi. There’s my good girl. There’s my good girl.

Cody For Amaris:
Hi, everybody. My dad does my voice for me because I don’t talk.

Speaker X:
Hello.

Cody For Amaris:
A couple of weeks ago my sister was asking my dad lots of math questions, and then I started answering and she was like, “How do you know all those answers?” I didn’t tell her that it was because my dad was answering for me. Bye, everybody.

Speaker X:
Bye, Amaris.

Cody Willard:
This was a treat. What’s your favorite stock right now, Amaris? “Find me a good genetic replacement stock, Dad.”

Cody For Amaris:
Bye, dad.

Cody Willard:
All right, that was a treat. What was the question? Do any of these question even matter after seeing Amaris’s joy? Does any of this matter when Amaris comes in and give you love like that? Did everybody get their heart filled up a little bit? I hope your heart got filled up a little bit there. That is one joyous kid.