Trade Alert: Taking Some Profits + Un-Globalizing The Economy, Stocks Vs Real Estate And More
Before I jump into the questions, let me say this — if you were losing sleep or otherwise stressing out about your stock account at the lows late last week, now is the time to readjust your portfolio. Take a little off on your some of your larger positions, especially if you have one or two that are way bigger than your other positions. Raise a little cash here. I did exactly that in my personal portfolio and in the hedge fund today, trimming some FB, SHOP, BABA, JD, etc and in the hedge fund I added some more puts and/or some shorts on the indices and leaned on some of my individual stock shorts, hedging some TSLA (shorting and buying puts is not ideal or suitable for most people’s personal accounts). Be careful out there, we are not out of the woods with this market or economy and valuations in a lot of crappy and a lot of good stocks are very stretched again after this huge rally off the lows last Monday.
Here’s the transcript from this week’s Trading With Cody Live Q&A chat.
Q. Cody, on a scale 1-10 how bearish are you?
A. Hmm, let’s do both a bearish scale and bullish scale. On a bearish scale, I’m about a 6. On a bullish scale, I’m about a 5. I’m not sure this makes sense for the two numbers to add up to more than 10, because it should probably be a spectrum. But this market and the bubble and the popping of the bubble and the war and the pandemic and the end of the liberalized globalized geopolitical world as we knew it for the last few decades …this market is wild enough that it’s probably okay to have the scale anomalous right now.
Q. Cody, which are you more bearish on now, stocks or real estate?
A. I’d say I’m more bearish on crappy stocks than I am on crappy real estate, but I’m equally bearish on stocks and real estate in general right now. Crappy stocks go to zero and lose 100%. Crappy real estate might lose 30-50%.
Q. Cody, do you think interest rates (10 yr mortgage rates, etc.) have overshot on the high side or do you think they continue to go higher?
A. Both! I could see a near-term pullback that last weeks or months but over the next few years, rates are probably headed slowly higher.
Q. TSLA is in relentless rally mode again; up 33% in less than two weeks ($775 to $1036). Every time I’m tempted to trim it goes up some more and I’m glad I held off. Any ideas what’s going on? Is it related to oil prices and supplies?
A. I think the market was like: Whoa, opening Berlin and Austin Gigafactories means that Tesla can make more than 2 million cars a year starting next year. Let’s call it 2.2 million in 2023 at an average selling price of say, $70,000 (inflation). That’d be $150 billionish in revenue and let’s assume 35% gross margins so that’d be more than $50 billion in gross profit, call it about $60 billion in gross profit. Take out $12 to 15 billion for operating expenses and you’re talking about nearly $50 billion in profits in 2023. Throw a 20 P/E multiple on that and people are like, TSLA ain’t too wildly expensive here. I still hold plenty of TSLA as I have since I made it my largest position back three years ago at $50ish levels and I’d done this same math and realized the huge potential upside this stock had at the time and I outlined that analysis for you all over and over for months. Now Wall Street has caught up to that vision, I guess. I did hedge some TSLA in the hedge fund today as it is quite overbought and probably a bit overvalued right now.
Q. What are your thoughts on google and amazon? I personally think that AMZN might be overvalued but GOOG might be reasonably priced.
A. I’ve owned AMZN since like $500 and I’ve owned GOOG since the day of its IPO and I love the Revolutionary businesses that both have become. Neither is terribly cheap right now after this rally, but I’m a buyer of either for the hedge fund 10-15% lower than these levels.
Q. Cody I want to own more INTC. Should I wait or buy it here?
A. Stock answer for this stock question is this: Maybe buy 1/3 as much as you want now and then do more over the next few days.
Q. Cody, any new thoughts on MP? I’ve been holding since some early buys and it’s up several 100%. I’ve been trimming some along the way. Now it’s almost back at all time highs. Would you add more here? Is this a potential 10x from here over the next several years, especially with your less globalization thesis?
A. MP is, like Intel, perfectly positioned for this Un-Globalization/Domestication Revolution that is in place for the next decade at least, I think. That said, MP is not cheap and is not Intel. I don’t know the management here well (and I don’t like the guy who brought the stock out as a SPAC) but I hold a small-ish position in this name. I would be a buyer again in the $30s.
Q. Cody, I recall recently you saying you’d have another look at DVAX. I’m wondering if you’ve checked in with your friend who originally recommended it, or otherwise have current thoughts? Thanks.
A. Yes, I did some work on it and talked to my friend who knows it well and he still likes it quite a lot. I have started to nibble a small starter position in this name around these levels here and I’d like to actually build up this position near $10 or below but no rush. Consider this a Trade Alert.
Q. Good morning, hoping all is going well with you and your family. Please take a look at MRNA they have a lot more in the pipeline than COVID vaccines, plus a boat load of cash. Your thoughts?
A. I’m not a fan of the CEO at MRNA and I think the stock is pretty much dependent on the Covid vaccine for the foreseeable future as it will take many years for any other lines of business to move the needle like Covid vaccines have for this company.
Q. Do you have any opinion on PAYX as a company and as an investment?
A. Haven’t done much work on it. Taking a look now, I see growth of less than 10% per year, trading at more than 30x next year’s earnings. Not cheap, not Revolutionary. Not for me.
That’s a wrap. Thanks all!
I leave you with this deep thought: Maybe unicorns are real?
