Trade Alert: This Virtual Reality Platform Will Change Reality

We’ve added quite a few new subscribers to Trading With Cody in the past few weeks, so here’s some analysis from a book I wrote a few years ago. I think it’s a good way to start today’s report as so much of it still applies and I want to talk about virtual reality because virtual reality is about to go prime time. Also, we’ll do this week’s Live Q&A Chat at 11am ET tomorrow (Thursday). Come directly to the TWC Chat Room or just email us your question to support@tradingwithcody.com.

A note about Revolution Investing.

If you haven’t been in the markets, but you’re sick of getting 0% on your CDs, Treasuries, savings, checking, etc., while the markets have been continually hitting all-time highs this year, what should you do now?

First, step back and catch your breath before moving any money anywhere and make sure you’re not about to make any emotional moves.

If you haven’t yet read “Everything You Need to Know About Investing,” (You can get it for free just by joining Scutify, the #1 financial social network and simply asking me for it on there), then spend a couple of hours doing so, please. It’s a quick read, but chock full of important ideas, concepts and strategies that amateurs and pros alike should understand.

Then if you do decide you want to invest in some of the stocks I talk about, you should consider slowly starting to scale into some of the ones you like best and/or the ones we have rated highest.

I wouldn’t rush into a full position all at once in any of these stocks or any other position you’ll ever buy. Patience and allowing the market and time to work to your advantage by buying in tranches is key. Maybe one-third or one-fifth of whatever you might consider to be a “full position” in any particular stock. And I wouldn’t ever have more than 5%-15% of your portfolio in any one stock position at any given time. The younger you are and/or the higher the trajectory of your career income, the more concentrated and risky you can be with weighting in your portfolio. But spread your purchases and your risk out over time and over a several positions, no matter your age or risk-aversion level.

We’re trying to find the most innovative companies in the most disruptive and revolutionary industries before the rest of Wall Street catches up to the trend. And more specifically, in today’s markets with the Fed’s endless money-printing and lending at 0% rates to banks and all the other artificial help of QE, stimuli, targeted tax breaks for giant corporations, etc.

Some of our past successes have included getting into Google on its IPO day, Apple at $7 a share, getting us positioned to profit in front of the ongoing bubble blowing bull market five years ago, loading up Facebook after it crashed post-IPO in 2012, and the booming App Revolution Bubble that is also still continuing.

But that doesn’t mean we just blindly plow into the stocks in those Revolution Investing sectors. We have to be careful about who we’re betting on individually, in addition to managing our portfolios with time, price and Fed ramifications.

One of the most depressing aspects of this ongoing bubble-blowing bull market is how retail investors are once again blindly plowing into what they think are Revolution Investing sectors, such as the current electric vehicle and green energy stock frenzy. I’ve been loudly bashing many of the stocks in those sectors that are currently up 1,000% or more over the past few weeks as the frenzy has built up.

And like I said that doesn’t mean you just blindly go out and buy every stock you can find that says its going to be huge in those sectors. Much like I’ve spent and continue to spend endless amounts of time trying to make sure we’re got the best and safest stocks in these Revolution Investing sectors like The Cloud Revolution (or the aforementioned EV Revolution), each individual stock or fund you ever buy must be researched continuously.

It’s easy to get lost in the back and forth of the near-term action of the markets. And I, for one, do think it’s wise for even long-term investors to take some stock exposure off the table when markets are at all-time highs.

But in the end, the key to long-term outperformance and making big money in the stock market is find and own the best and most revolutionary companies who are disrupting or creating new marketplaces that will have huge growth ahead. Say, like Apple and Google were positioned to do back when the smartphone/tablet and search markets were just being created or when we snuck in loaded up on Tesla at $50 less than two years ago.

When you’re looking at long-term, revolutionary-type investments, you’re obviously trying to find markets and companies that are growing quickly and with huge potential in front of them.

There are two types of growth, secular and cyclical. Cyclical growth happens when a company and/or a market see upside along with the broader economic cycle. Energy companies, metals markets, chemicals, housing and many commodities fall into this type of category. That is, when times are good, so too will their businesses likely be good and when times are bad, all the boats sink together.

Secular growth, on the other hand, happens when a nascent industry is taking off, about to grow into revolutionary proportions as it displaces old business models and technologies. Two factors contribute to an industry’s secular growth: Entirely new demand is created and demand from other industries is taken. Netflix and other web/app video sites, for example, are contributing to more people consuming more video than ever before. But people are also spending some of the time that they used to spend watching network and cable television on Netflix.

Likewise, virtual reality is going to be secularly-growing, eventually reaching new revolutionary proportions, creating new end-markets, consumption habits and prosperity for our economy as well as our society at large. Just like Captain Picard used to be able to go into a “holodeck” room that could simulate any environment and/or historical scenario on his starship Enterprise, so too will we be actually simulating the actual movements of players and feeling the contact from the tackles when we play Madden 50 in another few years.

People will also find that being able to gesture to their devices to get interaction with them will often be much more convenient than actually talking to the devices all the time. Simple talks like turning the volume up or down when you’re watching a movie on your gadget that’s projecting a live holographic video feed from Shanghai of Superbowl LXXVI (in the year 2031) into your living room will be easier than asking it to turn the volume down while you’re talking to your grandkid.

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I got an Oculus Quest Virtual Reality headset from Santa. I opened it up, put it on and my mind was blown as the floor seemingly started moving, stars started shooting towards me and the surround sound boomed in my ears. I said “whoa” about fifteen times in the first two minutes. I had my six-year old daughter put it on and she couldn’t believe what she saw either. She started launching handheld rockets into space and hitting a tether ball. My wife joined into the fun, hitting ping pong balls high into the air. Each of us who weren’t wearing the headset and being blown away watched on the screencast on my phone.

And that was just the “How To Use Oculus” intro!

Though I was the Blinn Junior College dorm champion of Tecmo SuperBowl back in 1991, I haven’t been much of gamer since I realized that wasn’t something to brag about as I traded my Nintendo in for a cheap acoustic guitar a few months later. But even though I’m not much of a gamer, I do realize that there’s a trillion dollar economy developing around video games so I own an Xbox and play on Playstation at nephews’ houses and so on. I am now becoming a gamer because playing games in virtual reality is an order of magnitude more fun to play and use than any interface I’ve seen ever. When you play many of the games, including first-person shooter games or boxing or ping pong, you actually get an aerobic workout while playing a video game! It’s actually healthy for your body to play Oculus games.

And look, it’s not like I haven’t played virtual reality games before. I’ve played with cutting edge VR headsets at the Consumer Electronics Show last year. But they were incredibly expensive and didn’t have hardly any apps or games yet.

Enter the latest Oculus Quest VR headset that has been cut in price and is better quality than the $200,000 headset I played with at CES. And because Oculus is about to starting to go mainstream with consumers, it also has become its own platform for game and app developers and already has critical mass of developers too. When the first Oculus Quest headset came out two years ago, there were only about four dozen games and apps available. And now there are hundreds of games and apps available. Long-time followers know that I was adamant that Apple’s iOS and Google’s Android were going to be the only two operating systems that won in the smart phone wars because they had enough this same platform virtuous cycle set up while their competitors like Blackberry and Microsoft and others did not have this set up and thusly the others all failed.

Moreover, the Oculus Quest as a product reminds me of the Tesla Model 3 in that each product was such a huge leap forward it ahead of the competition (Oculus vs old fashioned video games) while dropping in price to where the mainstream consumer can afford them.

I am excited about the day when I will use an app from Interactive Brokers or from ETrade inside the Oculus Quest platform so that I can manage my screens and see stocks fundamentals, prices and charts and financial news video streams while having the Masters stream on a what will seem like a giant screen right behind me. This stuff is happening now and in five or ten years traders in their 20s will think working in a virtual reality setting is normal. The applications for other industries are endless. Virtual Reality is ready for prime time and the maker of Oculus is the best positioned company to bet on. Who makes Oculus? Oh, Facebook? Well, we have owned Facebook since it was at $25 per share after its IPO and I still own it. I am nibbling a little more FB for the hedge fund right now and in coming days and weeks will look to build it into one of the hedge fund’s largest positions for this year, in large part because Oculus is going to blow people’s minds for the next few years. Growth and high margins for FB as the platform owner once again.