Position Sizing, Fed Funds, LUNR Beast Mode, Drinks With Subscribers in NYC, More

We invite you all to a “Drinks with Subscribers” on Wednesday (2/28/24) at 3:00 pm – 4:30 pm at the Tommy Bahama Restaurant, Bar & Store located at 551 5th Ave Suite 101, New York, NY 10176.

Nvidia’s earnings are out after hours and the report is good, but not as amazing as the last couple reports were.

Q. Hi Cody, when you say a position has become too large in your portfolio and you trim aggressively, what percentage of the portfolio would that be? 10 percent? I have TSLA and META both around 9 percent of my portfolio but don’t really want to trim those, and UBER and GOOG are around 5 percent and I already trimmed UBER twice last year when it was going up. I would rather add more UBER than trim honestly.

A. Everybody has different risk tolerance, goals, emotions, and so on, so there’s no scientific answer to this question. In my personal account, I have more risk tolerance than my investors in my hedge fund do, for example. I might not want a position in my personal account to get to be more than 15-20% but after having bought NVDA at $8 in my personal account seven years ago, it’s getting to be that kind of size and I trimmed a tiny bit of it a few days ago. In the hedge fund, I don’t like to have more than 10% in any one position and even that kind of concentration in one name would be rare.

Q. Cody and Bryce, are you adding any puts here, anticipating turbulence near term?

A. We’ve sent out a few Trade Alerts in the last week or two when stocks were hitting new highs that we were buying puts on semiconductor stocks and cloud stocks and bitcoin miner stocks, etc. We’re not currently buying much puts right now and indeed, we’ve trimmed down some of the bitcoin miner puts and have trimmed a few other puts into this sell-off this week. We still have quite a few puts and hedges and are keeping most of them in tact for now.

Q. Best guess on the road ahead for Fed Funds? Staying north of 5% for the foreseeable future or will the Fed actually be able to cut at some point this year? Any concern for stagflation? Thank you!

A. I’m still of the opinion that inflation isn’t low enough. and probably won’t be low enough this year that the Fed will feel comfortable cutting more than once if at all. I am not terribly worried about a stagflationary economy as I think inflation will indeed move towards 2% or so if the economy goes into a real recession that lasts more than 180 days.

Q. LUNR Beast mode!

A. Indeed, that stock has gone figuratively to the moon just as the company is literally trying to get to the moon. This trade worked out about exactly like I thought it would when we put it on, although it actually did go higher than I expected when it hit $13 this morning. We’ve trimmed some more down and have a small position in this stock now and I plan to hold it steady for a while now.

Q. Cody if/when LUNR has a successful landing tomorrow evening, do you expect it to maintain a higher price/foundation for the long term or do you think it will creep down until the next newsworthy event?

A. The reason we bought LUNR when we did was because 1) LUNR was down at its all-time lows just before 2) the company was about to do a lunar landing. So I figured the stock would rally big time as they launched their lunar landing and that the stock would probably get hit on a sell-the-news set up when the lunar lander actually lands, even if it works perfectly. The stock then went up 5x over the last five weeks and we have continually trimmed it down and now it looks like the sell-the-news set up is playing out. The stock could be back at $5 or $6 in a week or two. I plan on holding my remaining shares in LUNR for at least a year or two now.

Q. Does it make sense that LUNR did what it did while RKLB “languishes”? LUNR closer to profitability?

A. Look, Intuitive Machines and Rocket Lab are two very different space companies. And even after LUNR just went up 5-fold from where we bought it, the company is still worth a fraction of Rocket Lab’s valuation. LUNR had a unique and first-time-ever catalyst with its lunar landing while Rocket Lab continues to do its consistent space business. Lunar’s not closer to profitability per se, but the catalyst was the catalyst and it worked.

Q. Cody, around what percentage of your original LUNR position are you still holding?

A. We’ve sold more than 3/4 of our LUNR after today’s trims above $13 earlier this morning.

Q. Cody: any thoughts on PANW?

A. As you all know, I am worried that cloud stocks and cybersecurity stocks are in a bubble. That said, PANW is one of, if not the, best cybersecurity stocks on the planet and as such, we went ahead and nibbled a little bit of it and CRWD today after they got hit so hard. We would probably look to buy more of PANW below $250 and below $220, I’d get more serious about building this position up.

Q. Cody: on PANW, what do you think are the main reasons for the dive down here? I read that part of them is about billings.

A. PANW was way overbought and probably bubbled up at an unreasonable valuation (like most cloud stocks) heading into that report last night and it was not a good report or good guidance. So the stock gets taken to the woodshed and is now not so bubbly in its valuation and might need to sell off some more to shake out the greed that was so rampant in it before that greed started turning into fear today.

Q. Thoughts on SEDG down pretty significantly after earnings here?

A. Yea, it wasn’t a good earnings report last night and the guidance is bad again. I am probably not a buyer until it’s below $60 and $55 looks like a pretty decent place I’d consider buying more. No rush on this one.

Q. Any thoughts on NVDA’s pullback?

A. NVDA was way overbought, a bit overhyped and quite overexposed when it was running to $800 (where it would have become the third 100-bagger of my career, alas it didn’t get there). There are so many calls and puts bet on tonight’s earnings report from people/funds looking to hedge and to be greedy and to protect their fear, that I actually expect NVDA to be up or down less than 5% tomorrow after the earnings report.

Q. Is there a level where ANET becomes interesting?

A. We haven’t done as much work on ANET as we should have and we will try to dig into it soon. If we ever buy it, you know I’ll tell you!

Q. Is $39 still the price where you would add more Intel?

A. Probably. It’s not a line in the sand for us or anything, but yes, I would probably nibble some INTC below $40.

Q. Hope you and yours are doing well. Sorry I won’t be in NYC for the subscriber get together. If you do one in San Diego or even LA I will certainly be there. It must be 6 years now since I met you in New York. I vividly recall walking with you to a toy store to get a gift for your daughter. Curious your updated thoughts TMUS, and the (seemingly) always disappointing U, and RKLB. Finally is there any scenario where you can see LUNR overachieving beyond this launch. ? Thanks always Cody.

A. Thanks for the kind words. Kids are doing well. And yes, I remember that walk to the American Girl Doll store together. I like TMUS and their SpaceX partnership that might very well help the company take a lot of market share in rural areas around the country. Unity reports earnings next week and I’m excited/worried to see what they say. I’d assume that their gaming engine business is on fire and that their ad business is still struggling. I don’t know if Lunar can “overacheive” but they have a lot of lucrative contracts with NASA for the next couple years and I am going to hold onto a small remaining position in that name.

Q. Is the market so down on INTC now that this announcement doesn’t move the stock? “Intel to manufacture chips for Microsoft as AI drives demand.”

A. Wasn’t really new news. The market was anticipating that this would be announced He needed to announce NVDA as a new customer for the foundry to make the stock pop today.

Q. CODY/Bryce JMIA a name from the past seems to have really turned around things, interested in hearing your thoughts

A. I haven’t looked at it in many months so I’ll take another look at it. Thank you.

Q. Cody: please say hi to Amaris and the rest of your family.

A. Thank you, will do!

And I’ll you all with a picture of our two dogs as I found them this morning sleeping next to Amaris’ bed when I woke up with Amaris early.