Trade Alert: What We Should Focus On Now
Everybody wants to be a Revolution Investor these days. It’s gotten crowded around here.
Let’s step back and look around and get some perspective on how we make money long term. It’s not about looking around for 10% growers…
It’s about much more than that.
Strut pout, cut it out, all taking and no giving
Watch me baby while I walk out the door – Strut by Sheena Easton
I don’t know why that song got stuck in my head as I was thinking about the markets today. Maybe I was thinking the lyrics were: “Up, down, in and out, take it and you give it” and that sorta describes the market action lately. I’m still more of a long-term buyer than a seller but I did do some trimming and nibbled some put hedges for the hedge fund today. Anyway, let’s talk about what really matters…
We’ve always made our biggest money by getting in front of trillion dollar trends LONG BEFORE they become so.
And I had an epiphany the other day. I realized that there are indeed three burgeoning Revolutionary trends that are in the sweet spot for us to get in front of and that we should focus our buying exclusively on these three sectors. You might recall that we got we were probably just about the first investors to position for the following Revolutions among others:
The Streaming Revolution (See: Cody Cam Video Revolution on CNBC from 2006)
Smartphone/App Revolutions (See Cody Shot Clock on Fox Business from 2008)
The Cloud Revolution (See 30 Stocks for The Cloud Revolution book from 2011)
The Cryptocurrency Revolution (See: 21st century madness of crowds and popular delusions on Trading With Cody from 2013)
The Electric Vehicle (Read this, you’ll buy TSLA and a Tesla from 2019).
We have many huge winners in our portfolios that we’ve owned for years because we were early in recognizing the trillion dollar potential of those sectors, each of which eventually become worth trillions of dollars and eventually getting very crowded with investors who want to catch what they hope is MORE trillion dollar upside (more being the operative word, see, because we already got in front of those Revolutions BEFORE they became trillion dollar revolutions). The App, Cloud, Streaming, Crypto, EV, Revolutions are still quite crowded actually, as everybody wants to be a Revolutionary Technology Investor so they’ve all crowded themselves into these now already-developed markets).
On the other hand, I think there are newly-burgeoning trillion dollar revolutions and one unappreciated sector that will soon bring another trillion dollars of Revolutions to the marketplace too. And that’s where I want to exclusively focus my time, energy and investing. Here are the three sectors that I plan to almost exclusively focus on for the foreseeable future:
1) The Re-Domestication Of The Supply Chain Revolution (I’m trying to come up with a catchier name that fully conveys the concept but this is the best I’ve come up with so far. I’m open to suggestions from readers…). The boards at every company on the planet that sources anything from China or the Middle East or Taiwan are sitting around talking about how they can’t continue to use the same globalization playbook that they’ve used for the last few decades. They have to bring as much of their supply chains and their factories and their logistics to their home country as possible. That means hundreds of corporations are going to spending trillions of total dollars building factories, distribution networks, and other supply chain services and products in the next decade. That’s a trillion dollar revolution we need to get in front of because these companies are going to invest as much as possible upfront to make sure these factories are as laborless as possible. Despite the focus on laborlessness, the onshoring of trillions of dollars of annual output into the US will create millions of new jobs, it’s just the output per employee will be at previously unheard of levels.
In some sense, Tesla is the model for what will happen across a wide array of manufacturing industries as they domestically source and build as much of each product das possible. Likewise, it’s possible that someday Tesla’s human-shaped robots will indeed provide laborless labor for factories too. Tesla as a robotics company? They already build their own factory robots anyway. Point here is that The Onshoring Revolution (better name?) is real and is going to be worth trillions of dollars for investors in the next decade and we want to continue to figure out the best places to get in front of this trend.
My favorite stock for this revolution is Intel INTC. Intel is the only company on the planet that can help the US and Europe try to create their own chip supply chains and if they don’t do it, the entire Western economy and perhaps civilization will collapse if China ever takes over TSM and shuts off the US access. The company will let governments pay for most of the fabs and they could be a monopoly in the West in the single most important supply chain for our economy — making chips. (I’d also mention: *Could be taking market share for the first time in a decade. If so, will probably keep taking share for the next decade. *Trading at less than 7x 3 years out profits, less than 10x next year’s estimates. *Has a rock star CEO that nobody wants to respect.)
And I’ve just started building a full-sized position in Rockwell Automation ROK, a company that focuses on Smart Manufacturing. I’ve got a spreadsheet full of names but this is the only that I’ve warmed up to so far as both its valuation seems compelling at 9x my 2025 profit estimates, with double digit topline growth and very strong marketplace positioning in several subsectors. The stock has been moving up in a straight line for the last week or so as I’ve just been finishing up my homework on the name and I’d welcome the chance to scale into a larger sized position if it will come back down towards its recent 52-week lows. I’d also mention that I’ve decided to sell the other half of my Roku. I guess you could say I’m dropping the U in ROKU as I swap ROKU stock for ROK stock. See, The Streaming Revolution in 2022 isn’t new or burgeoning in the way it was back a decade ago or fifteen years ago when I was hard at work learning how we would eventually invest in it. I’d rather look for the next, still-unrecognized trillion dollar market place. ROK’s better positioned for more potential upside while being a less crowded investment than ROKU. INTC’s better positioned with more potential upside while being a less crowded investment than NFLX is. I’ll write more about Rockwell in coming weeks.
2) The Space Revolution. Costs to get stuff and people to space are plummeting and the technological abilities of all the stuff we send to space continue to exponentially get more technologically advanced as the prices continually decline. The Space Revolution is at the first batter up at the top of the first inning stage and most of the best long-term Space Revolution stocks are still privately-held. Rocket Lab RKLB is my favorite publicly-traded space stock. I’ve also started nibbling on a new space stock called Terran Orbital (symbol is LLAP — Live Long and Prosper, get it?) which I’ll write much about in coming weeks. Five years from now, I expect we will have a hundreds of publicly-traded space stocks to choose from and a handful of names that will be on there way to attaining trillion dollar valuations in their own right. Now’s the time to learn how to invest in space, just like it was back 10 or 15 years ago when we were learning how to invest in The Streaming Revolution.
3) The Biotech Revolution. A sector that’s been left for dead for a long time but which which about to see a bunch of new near miraculous medical, life-extending, life-bettering breakthroughs. I’m not as savvy in the biotech/medical industries as I am in most other tech sectors so I’m treading lightly here and slowly and using a basket approach. In the biotech sector, I own IBB, XBI and small positions in DVAX, PRVB, maybe another name or two in the hedge fund and I’m constantly researching new ideas in this sector these days. This sector, unlike the prior two, isn’t exactly brand new and indeed is already a trillion dollar market place. Just something to think about.
Each of these three trillion dollar Revolutions are compelling for their respective reasons. Each will have a handful of companies that get to be worth a trillion dollars or so. Each will have dozens or hundreds of companies fail. Our job is to keep finding the clearest winners and investing in them when the valuations are compelling and the larger trillion dollar trends in front of them are widely ignored or unrecognized. Let’s keep doing our job.
We’ll do this week’s Live Q&A Chat tomorrow (Friday) at 2pm ET in the chat room on Trading With Cody or just hit reply to this email and send us your question.
