SPACs, NFLX Cuties Controversy, TLSA Battery Day Hype, Too Many IPOs, Etc

Here’s the transcript for this week’s Live Q&A Chat.

Q. Cody, Cramer’s take, for what its worth, is that too much money is needed for the flood of IPO’s that is coming and that will put ongoing pressure on tech, as people will use that for a source of funds and that essentially the same thing was what killed the market in 2000. My view is that was only one of the problems in 2000, that after these hits most of our stocks are not crazy expensive and that I am not sure if the ****’a actually soak up some of the IPO demand. Thoughts?

A. If you go look at the Ben Graham quotes I used in recent articles when the markets were at all-time highs this summer, you’ll see that I do think there’s a broader issue of too many companies coming public at too high of valuations all at the same time. That said, each stock is unique and while the overall market trends always impact the movements of individual stocks, it’s not the only thing that matters. But I have been saying for the last month or so when the Nasdaq went parabolic that I think there could be a pendulum swinging back the other direction finally.

Q. Hi Cody. Can you share your opinion on SPACs? There seems to be more and more of these deals going on. I own some shares of GMHI and it’s a bet on the future of autonomous driving. AND Q. Hi, Cody I think that it would be useful to quite a few of us, if you could explain exactly what a SPAC is, and what it is not. Is it a better way to have a chance at buying IPO’s as a non-certified investor?

A. Well, the short answer is that someone does an IPO and/or buys a shell of the stock of a company that was once actually doing business but is now just a shell on an exchange — and then that someone goes and basically takes a private company public using the publicly traded shell/stock. I don’t have an opinion about “SPACs” though. Each SPAC is different, each time one goes public/gets bought is unique and we have to look at them as individual stocks, not as a group.

Q. From yesterday’s “Chicken” post: “…and I am likely to start nibbling on (not to be confused with pecking away at) some of our stocks that we’ve owned forever, including SPOT and FB…” Are there any others that you are close to nibbling at?

A. Yes, quite a few here. SPLK, AMZN, GOOG, ROKU, maybe NVDA. Most of our names that have pulled back at least 15% or more are starting to look interesting as nibbles.

Q. Cody, you’re ridiculously good at what you do – the best in the business so far as I can tell. Thank you for all you do.

A. Wow, a lot of kind words today! Thank you.

Q. Helllooooo!!!! Cody thank you thank you. my port is well up following just some of the things you told us to do : if id have been able to follow you more in feb / march it would be through the roof . life would be a bit different if i were not your subscriber : i feel lucky to have been following you and so appreciate all levels and dimensions that you share with us xxxxx

A. Thank you so much for the kind words. I do my best and it’s been working out for all of us. Nothing’s easy in the market though.

Q. Hi Cody. I had wanted to say this for a long time now: I owe you a big gratitude for taking care of my portfolio. What a difference TradingWithCody made for me. You are the only one that really care about us and treat Tradingwithcody portfolio like you are trading/investing with your own money. . Many others just fire out recommendations after recommendations with no regards to the valuation and financial health of the stocks. I know the battles never stop, so I’m knocking on woods. My best regards to your adorable Amaris, Lyncoln, your wife and you. Sincerely, V.

A. Wow, the nice words flow continues. Thank you. From a business perspective, I’ve always figured keeping my subscribers is easier than getting new ones. And I can’t imagine the churn at most newsletter investment services that churn out the random stock picks and trading ideas and churn through their customer bases just as fast. We’ve truly built wealth together at Trading With Cody over the last ten plus years and I’m proud of that. Thanks for being a part of it!

Q. Hello Cody, will you join me and encourage everybody to sell NFLX for the disgusting and sick release of “Cuties”?

A. Q. No doubt this ad for Cuties from Netflix alone is enough to make me feel disgusted at the company. But I’m also disgusted at Google for invasion of privacy, Facebook for all the disgusting things that go on there, I’m disgusted at every company I own for lobbying and receiving billions in corporate welfare and illegal protections and for being monopolistic and so on. I don’t usually invest in companies that make guns or defense weapons because their business models actually benefit from violence. I’m not sure Netflix is as evil as all that, but I did consider cancelling my subscription in protest when I first saw this ad (I literally thought it had to be fake when I first saw it because it’s just so….off for anybody with a moral compass. https://imagesvc.meredithcorp.io/v3/mm/image?q=85&c=sc&poi=face&w=1088&h=1451&url=https%3A%2F%2Fstatic.onecms.io%2Fwp-content%2Fuploads%2Fsites%2F20%2F2020%2F08%2F20%2Fnetflix-cuties-1.jpg

Q. OK, I get the investment side. But at a minimum cancel the NFLX subscription.

A. I’ll talk to my wife about it. Maybe at least a temporary cancellation of it to send a message?

Another subscriber Q. I don’t know how many of you have seen young girls perform in dance competitions and cheer leading events, but it is gross what these young girls are taught to do, and Cuties is a comment on this, not an advertisement for it.

A. I don’t know much about it at all…but if Cuties wants to make a productive comment about it, maybe avoid contributing to the problem by sexualizing the girls in the ads?

Q. Cody, lots of hype around the TSLA battery day… I added some hedges against my position when it was 450+, and that worked out as it came down to 330’s and removed them…. now 10 days later we are back near 450… do you like a refresh of hedges or sit tight? AND Q. Cody, you recently implied that TSLA’s battery day is going to be extremely anti climactic, and not live up to the hype. Does that mean you are confident they will not announce (a date certain by which) the cost of manufacturing their batteries will fall far below $100 per kilowatt-hour (or do you think that’s already priced)? (I think everyone assumes they’ll announce a million mile battery life). Given your premise, would you trim or even buy puts in TSLA ahead of battery day?

A. On the one hand, the hype from analysts and the media and investors around Tesla’s battery day makes me want to hedge the stock for sure. On the other hand, we have definitely learned that trying to time when and why the market will love TSLA and then hate TSLA is next to impossible. If you believe in the company long-term, I’d mostly sit tight (assuming you’ve taken some profits since we bought the stock at a split-adjusted $50 a share last year). In summary, I do think hedging the TSLA into the event seems like a reasonable thing to do with a stock that’s gone up as much and has gotten as big as this one has in our portfolios but in five years, I’m not sure we’ll remember what the stock did after the Tesla Battery day in 2020.

Q. Thoughts on adding to SPOT here? It is close to your price target. Thank you.

A. I like SPOT here as it’s pulled back sharply from its recent highs. I’d leave room to buy more later too though.

Q. Cody: re SPOT is it a trade alert? I am buying when you are buying! Also: Are you out of CSCO or still holding it? Thank you! Appreciate your work!

A. No, not a trade alert — was just saying it’s getting more compelling as it’s come down. I’m mostly sitting tight still. I sold the CSCO a couple weeks ago.

Q. Cody you mentioned a nibble on FB. How concerned are you about AAPL iOS changes that may make it much easier for users to opt out of personal data uses that drive ad value for advertisers?

A. Yes, definitely concerned that FB could be affected by that short-term. Long-term, not sure it matters.

Q. It seems as if zoom has now become a verb. The story on their ceo is unbelievable. Can they build a moat around their business and expand the business.

A. Your question hits the crux of the investment debate in this name. I’ve trimmed some of it and I never did make this a big position, but I’m sitting tight on the shares I own for now.

Q. Wondered what you thought about BYND and Impossible Foods and fake food in general?

A. I think fake food will be a growth industry for a long time. But I don’t want to invest in it, as the technology itself doesn’t lend itself to creating moats for the companies making the fake food. Too much of a commodity force in the industry, I guess, for me.

Q. Your thoughts on Snowflake (SNOW) are very highly appreciated.

A. I love the business model and the sector that the company is in. But valuation is ridiculous at the current time. Maybe it makes sense to nibble a tiny bit, a toehold, to just get it on the sheets because it’s such a great company, but we have to be careful about just paying any ol’ price for a business.

Q. Interested in AMZN here down around 20% from its highs and having given back a lot of its gains YTD?

A. Yes, AMZN’s down $600 from its high, and it’s getting more compelling as a buy again. Not pulling the trigger yet much though.

That’s a wrap. Thanks to each of you for being a part of the Trading With Cody community and have a great weekend!