Trade Alert: Market Rocking. Here’s What We Are Doing

Markets are rocking today including many small- and mid-cap companies that have been absolutely punished lately. It’s been astounding how bad the performance of even some large stocks has been lately, with companies like Estee Lauder ($37.4bb market cap) falling 20% in one day on soft earnings after already being down nearly 60% from its highs earlier this year. The indices are largely hiding much of the pain in the market and today many stocks are finally bouncing after being extremely oversold. If you have been in pain lately, or losing sleep about some of your positions, today is the day to raise some cash. We are still bullish with respect to our longs but we are reducing some of our long exposure today.

We are making some trades that you’ll see down below. These are not major trades and we don’t want to get overly short or raise too much cash at once, but if you have been feeling the pain lately and are struggling with owning stocks that go down, it’s okay to take some of the pressure off and raise cash on a day like today. As always, shorting and options trading is risky and we don’t recommend individual investors do too much of either in their personal accounts.

Also, mea culpa for not getting out of Solaredge (SEDG) at the highs. The fact is I bought SEDG in the personal account when the stock was at $14 and am now feeling like a deer in the headlights. I still own it in the personal account and have a tiny position in the hedge fund, but mea culpa. Frankly, I don’t know what to do with it right now. It’s okay sometimes to say I don’t know what to do. I’ve been saying for months that solar stocks are in trouble with higher interest rates, but that doesn’t mean we want to sell Solaredge at this very moment when the stock is putting in 52-week lows. We will let you know when/if we decide to do something else with SEDG.

I also want to discuss NVIDIA (NVDA). NVIDIA is certainly not Solaredge. It is a unique semiconductor stock that is the best fabless chipmaker on the planet. And NVIDIA is very well positioned for one of the most important revolutions of our time, the AI Revolution. But that doesn’t mean it doesn’t face threats from the Great Semiconductor Shift and if its numbers don’t meet or beat next year’s expectations for insane growth, it is wildly overvalued. We don’t have a giant position in NVIDIA, but it faces Solaredge-type risk with the stock at these levels. If you are hurting right now with SEDG because you never trimmed any, now might be a good time to consider trimming some NVIDIA to lock in some profits, especially if you bought it with me at $7/share a few years ago.

I also want to discuss some of the plans for our small caps that have not performed well. Concerning Blade Air Mobility (BLDE), we want to hear one more quarter from management before we decide what to do. The last quarter was fantastic but the stock has continued to fall.  They report next Wednesday, November 8, 2023.

With regards to NuScale Energy (SMR), this stock has been painful, down about 60% since we bought it. I’ve said all along it is a very risky venture-capital-like investment. If it were privately held, you likely would not know the valuation had changed. But there is an increasing existential risk for the company as the stock price goes lower. I don’t have a large position in the hedge fund or in the personal account but I am sitting tight with it for now. Because of the vicious cycle that a lower stock price creates existentially for the company, I don’t have a price that I would lower price that I would buy more stock. This is counterintuitive to my usual approach to things but we need to see the stock price stabilize or maybe even go higher before we buy anything. With the stock price this low, the company will struggle to raise funding which it will likely need in the next year.

Here are the trades we are making today:

• Trimmed some call options across the board on the likes of Tesla (TSLA), Texas Instruments (TXN), and SPDR Gold Trust (GLD) which we bought recently.
• Trimmed a tiny bit of the small/mid caps like Instacart (CART), MP Materials (MP), Rivian (RIVN), NuScale Energy (SMR), Blade Air Mobility (BLDE), and Rocket Lab (RKLB) that were up nicely this morning.
• We bought a tiny bit of Globalstar (GSAT) after the stock fell following a pretty good earnings report. This is still a tiny position for us and like RKLB, SMR, BLDE, and most other small-caps, GSAT is not GAAP profitable yet and needs to grow quickly to justify the valuation. That said, the new CEO seems to have things on the right track for now.
• For the hedge fund, added some short exposure by buying a handful of puts on Carvana (CVNA), Digital Realty (DLR), Lithia Automotive (LAD), B. Riley Financial (RILY), SiTime Corp (SITM), and Vanguard Russell 2000 Index Fund ETF (VTWO); and calls on ProShares UltraPro Short Dow 30 ETF (SDOW) and ProShares UltraPro Short QQQ ETF (SQQQ).
• We are selling the last of our Upwork (UPWK).  We made nice money on it and took some profits already. We are locking in the rest and moving on.

That’s it for now folks. We are finalizing the transcript from yesterday’s live Q&A chat and will send it momentarily.