Pre-IPOs, Cryptocurrency playbook, PANW, and my family too

Here’s part 2 of 2 of the transcript to this week’s Live Trading With Cody Q&A Chat.

Q: When visiting the bay area you mentioned connecting with VC’s, startup’s, etc. Have you considered pursuing direct investments in companies like Palantair, Lyft, Uber, SpaceX, etc.?

Cody: For my own personal funds, not necessarily. I’ve had offers to invest in those but I don’t with my own money right now. I’ve talked about my own shifting risk/reward profile over the last five years since I got married, and I’ve had two kids; one of whom is medically fragile and very expensive. I also run a startup myself that is an app-related company like most of these. AirBnB is another one that I had the opportunity to get into. I think frankly that by the time those offerings were getting to me the valuations were pretty extended anyway. It’s not like I had the opportunity to get into Uber before it was a ten-billion dollar company or something (it’s now valued at 6-7 times that). So, no. I don’t personally invest in those companies and it’s partly because of my own risk/reward profile.

If you have a hundred million dollars sitting around and you don’t have any medically-fragile children and you make ten million dollars a year and you’re not doing anything illegal and you have the opportunity maybe these pre-IPO opportunities are for you. Look, if you’ve got ten million dollars sitting around maybe throw fifty or a hundred thousand dollars at a couple of these or something if you could find someone that would sell you that small of a position. I wouldn’t go crazy with your net worth on any of these privately-held companies. You know, they’re not publicly-traded, they’re not liquid.

Q: I’m going to change the subject a little bit. I’d like to talk about cryptocurrency and your thoughts of getting maybe a small position; maybe just for fun to watch; Bitcoin or Ethereum and what are your suggestions on that?

Cody: Ok. Thanks for the question. Great question because it’s on everybody’s mind. Number one, I think the cryptocurrencies are bubbled up. But I believe in blockchain. I believe in Bitcoin and Ethereum . I’m actually writing a book all about this stuff. I just started. We’ll have it out in a couple of weeks. It will be available on Amazon and on tradingwithcody.com of course. I’ll give it to all of my subscribers for free as always. It’s going to be a guide to Bitcoin blockchain cryptocurrency Ethereum.

The point being, look, it’s all about timing and if you don’t own any Bitcoin or any Ethereum or anything at all in the cryptocurrency world, those are the two that I like. There are hundreds of cryptocurrencies out there that have done initial coin offerings. Don’t you just love the initial coin offerings that make you have to buy Bitcoins to then invest in their currency and then those guys sell your Bitcoins for dollars and put it in their own pocket. Be careful with ICO’s. If you’re going to buy cryptocurrencies, Bitcoin and Ethereum are the only two that I have confidence will be here in five or ten years. There will be others. Maybe the greatest cryptocurrency isn’t even out yet.

Here’s something to keep in mind, when the internet in 1996 started going mainstream and then email addresses and then search started coming out in the late nineties, you had AltaVista, etc. And really, we don’t even remember the search companies anymore and that’s my point.

Because, in 1998, even when these other companies were already trading publicly and had billion dollar market caps, a little company called Google was getting started. And so, the greatest internet companies are Amazon and Google, and one of them was started even after there were already dozens out billion dollar competitors there, and I think that might be true of cryptocurrency. Bitcoin and Etherium are here to stay, but I wonder if over the next few years, or maybe right now, there’s a new cryptocurrency that is being created? And then it will have to have an ICO (initial coin offering). So, I guess we don’t say stay away from every ICO, but 99.9% of the cryptocurrencies out there right now are worthless and will be worthless in five years. They will be at zero. Maybe there’s another one out there that’s being created; maybe there’s one already that’s out that will be along with Bitcoin and Ethereum.

I told long time Trading With Cody subscribers five years ago that you should take half of one percent of your stock portfolio and buy Bitcoins. I was accepting Bitcoins as payments and I bought a couple too and Bitcoin was at a hundred dollars back at the time. You know, under a hundred bucks, around a hundred bucks and I said, look, if it goes to zero you lose one half of one percent and I think we’ve got some great investments that will more than make up for that anyway. And, knock on wood, we did.

But then Bitcoin actually went from a hundred to seven thousand. I actually started selling mine around twenty-seven hundred dollars recently. I guess not so recently, six weeks ago, two months ago.

Anyway, years ago, I said to put a tiny bit into bitcoin and it worked out great, but I wouldn’t even put one half of one percent in even right now. It’s a very different risk/reward at seven thousand dollars and Ethereum being up five thousand percent in the last three years too.

I don’t own any Ethereum right now. I probably will end up buying some. Look, I’m not going to rush into it. I think in the next two to five years everyone who’s thinking they are a genius right now in the cryptocurrency world is going to be crying in their milk because the bubble will pop.

But, the surviving cryptocurrencies will be a great opportunity to buy them, invest in them, and get going in them. Not planning on buying Ethereum or buying back some of my Bitcoins but not anytime soon. I would not be surprised to see Bitcoin under a thousand dollars a share in the next two to three years. I would be surprised to see it over ten thousand dollars before it does that though. So again, it’s all about timing out there. Be careful out there. Don’t put much money in cryptocurrencies. Stick with the ones that you know.

So, I’m fifty minutes into this. My wife just called me to tell me she was bringing me lunch. I didn’t take the call but she texted, and I said yes I would take some lunch.

Q: Hey Cody, I see that Palo Alto Networks is a nine-rated stock. My concern is that FireEye blew earnings. Do you think this will have any impact on Palo Alto Networks?

Cody: No. Frankly I don’t. Palo Alto is Cisco to FireEye’s Nortel. How’s that for an analogy if you’re a telecom guy at least. Palo Alto Networks is Google to FireEye’s Yahoo. We’ve owned Google. We’ve never owned Yahoo. I own Palo Alto Networks. I’ve don’t own FireEye. FireEye has been a serial disappointer. When they’ve reported earnings they’ve had lots of troubles like serial guiding down. FireEye market cap of two point seven billion and Palo Alto Networks is thirteen billion.

Q: How do you feel about STM?

Cody: You know, STM is a chip company. A supplier to smartphones and other things. It’s one that I’ve never really owned much and the stock in the last year has gone from five to twenty-five. It struggled for five years before that. It went from five to ten and back to five. It struggled for a long time, still at five, and then badda bing – a year ago it popped and hasn’t stopped rallying since. I’m afraid I have to do my homework on it. I don’t know STM’s situation right now specifically, but I will tell you in a generalized state that the chip business, cyclically speaking, is extended. And chips, historically speaking, have been somewhat cyclical.

Of course, this economy is extended too. But, as I wrote on my Trading With Cody note to start off this morning, the average shoe, piece of clothing, your smart device, your internet of things, your wearable; these things are going to have more processing power than the iPhone X in twenty years. Twenty years from now, your shoe will have more processing power, your car will have more processing power, your car tires will have more processing power than an iPhone X. And the amount of chips that makes that happen is going to grow exponentially. So chips growth revolution business, I own several, I bought Intel about ninety days ago when and it’s up twenty-five percent straight line since we’ve bought it. We own several. Nvidia, that we’ve owned like I said earlier, for a lot longer than that. STM I don’t know well enough to give you good information on one way or another.

Q: Quick question, How’s the family? That’s it.

Cody: That’s so nice of you to ask. Boy, the family is great. Let me pull up Facebook here and show you a picture of Amaris first.

Amaris is doing so well. She is just growing and getting bigger. And Lyncoln is just the smartest, cutest, most rambunctious, sweetest little thing.

Amaris’s favorite thing these days — it’s really funny — she’s obsessed with kissing me specifically. She kisses everyone a little bit, but she will just reach out and grab me and pull me by my ears and my hair and just lick and kiss all over my cheek. And then my wife comes over and says “I want one of those,” and Amaris thinks it’s so funny to turn around and pretend she’s going to kiss Lori and then goes “nope.” And she laughs so hard. You don’t hear any sound because she has this ‘trache’. So, we’ve never heard her cry or laugh or talk or anything. But her face gets these expressions that — her eyes are almost closed, her cheeks looks like they are going to pop right off. I mean, it’s just the cutest. She thinks she’s the funniest thing and she has such a great sense of humor. She loves to tease. And because she doesn’t talk, so much of her teasing is body movements and actions and trying to interact with you physically and it’s just a beautiful wonderful thing.

Lyncoln, her older three year old sister loves Amaris and runs in when she gets home and runs to hug Amaris and kiss her and wakes up in the morning and says let’s go see what my sister is doing.

The family is great. I appreciate the question.

Thanks for being a Trading With Cody subscriber all of you watching and listening and reading this who are. Peace, love, and happiness everyone. Be careful out there. Be careful with your money. Be careful with your kids. Be careful with life. Have some fun.