Yes, it’s a bubble. When will it pop? Cody’s Latest Positions

Don’t forget this week’s live Q&A chat with Cody is today at 2pm ET. It will be a chat room version, not a call in version. Please stop by the chat room and say ‘Hi’!

The relentless and increasingly strong rally in mega cap and large technology names has finally started reminding me of the action we saw back in the year 2000. When the Dotcom and technology bubbles were truly going through a blow off top. Mark Twain, as I often like to quote, always reminds us that “History doesn’t repeat, but it often rhymes.” I don’t want to pretend that we can draw exact parallels between right now and the year 2000.

For one thing, valuations, stressed as they have become recently, are still not at the same kind of outrageous multiples that they were in the year 2000 at the Dotcom and tech bubbles back then. Maybe we are still early on in the blow off top phase anyway, but something to think about, and it has been on my mind lately, is called a red flag.

Most people calling this current stock market a bubble were predicting stock market crashes every year for the last three, five or seven years. Maybe when a few more of those finally decide its not actually a bubble, that’ll be the top? Long-time readers know that I’m just about the only guy on the planet that turned from bearish to bullish in 2009/2010 and actually predicted that we would head into a new Great Stock Market Bubble. I called the crash in 2008, and I plan on helping us continue to get prepared for the next one, but not panic out before it’s time.

Now on to our positions…

Here is a list of my latest positions with updated commentary and ratings for each position.

I’ve broken the list into Longs and Shorts. And from there, I’ve broken down each list into refined categories in order from the largest positions within each category to the smallest. I also give each stock a current rating from 1 to 10, 1 being “Get out of this position now!” and 10 being “Sell the farm, I’ve found a perfect investment.”

So here’s the list:

Longs –

• Forever assets and other permanent holdings –
  • Media and other private investment/business holdings (9+ because betting on yourself and running a business is always a best bet)
  • Real estate, including land and the ranch I live on in NM (8)
  • Physical gold bullion & coins (8)

• Primary stock exposure portfolio
  • Facebook (7) – You know you’re in some kind of a serious bull market, if not an out right bubble, when Facebook and its recent action over the last 7 or 8 weeks has been somewhat flat, therefore people are disappointed. Mind you, this is a company we bought when it had a market cap of around $60-$70 billion versus now its market cap of $440 billion. I wrote several articles when we first started buying it about how Facebook was extremely cheap by any reasonably forward looking evaluation and that was true then, but not very true anymore. Evaluation is somewhat extended. The stock while flat for the last 7-8 weeks, has had a heck of a run over the last few years and some turn and even downward action in the stock for a few weeks or even a few months wouldn’t shock me. I trimmed some, near these levels, a few weeks ago and I am in no rush to buy more back. If you don’t own any Facebook I might consider doing 1/3 size tranche to get started, but don’t go crazy just now.
  • Google (7) – The focus I hear from money managers and analysis talking about Google these days is that it is a bet on the ventures and the future of the new various subsidiaries that Google has (IE: Self-driving cars, internet of things, and other Google ventures). Speaking of Google, I don’t know if I will ever be accustomed to calling it “alphabet” as it now known, maybe we should call it “Googlebet”. Especially since these days it essentially seems to be a bet on the future. Then again, maybe that doesn’t work at all because its not a bet on Google anymore, its a bet on these other ventures. Let’s call it “Venturebet.”
  • Apple (7) – Tim Cook, the CEO of Apple, talked on Bloomberg yesterday about how Apple is betting on an autonomous/artificial intelligence car platform, but they are not making Apple cars or about to make Apple cars anytime soon. Long time readers of Trading With Cody know that I have long said, that Apple is not about to make cars, but they are focused on the platform and that is indeed the case as Tim Cook confirmed. I think that is the right decision for Apple. Maybe in 10-15 years they can get into the car making business, but certainly not any time soon. The new Home Box from apple sure looks pretty cool though it feels like a high-end, me too Alexa, I do think there is enough hint of demand for an Apple product like that and the potential for Apple to really integrate that new Home Box into the Apple ecosystem is a tremendous opportunity. We will have to get our hands on the Home Box this Christmas to play with it and compare it to Alexa. I still don’t think Siri is as nearly good as Alexa these days. (My playlist just spoke to me.)
  • Amazon (7) – The hype around Amazon hitting around $1000 has been huge. I have seen several articles talking about what you guys have seen me saying for probably a year now, that Amazon could be the first, trillion dollar market cap company. That is still the case. Amazon web services, Amazon retail, Amazon Alexa, these are all businesses that Amazon dominates with, which are growing incredibly. The Alexa platform is going to be a big part of our future, even if you don’t use Amazon, because Amazon Alexa is in all of these Google and Apple, artificial intelligence enabled technology.
  • Nvidia (7) – As I mentioned in the previous latest positions a month ago I thought Nvidia could very well break out of the upside of it’s channel after what I expected would be an incredible earnings report. The stock at the time was around $100, it is now $150 because of the incredible earnings report and other momentum and hype. I trimmed some of my Nvidia last week when the stock was in the $160’s and I am in no rush to buy any back.
  • Sony (7) – Sony PlayStation is establishing itself as a virtual reality de facto standard early on the in this VR race. The PlayStation business is booming, the image sensory business is booming, the content business is improving. The strength in the yen over the last few weeks is developing into its own story and with Sony being based in Japan that is always a factor in our investment. Strong yen, bad for Sony; weak yen, good for Sony. The stock has rallied to new annual highs despite the strength in the yen which underscores how strong Sony’s fundamentals have been.
  • Ambarella (6) – I am still struggling with Ambarella and its lack of tangible, fundamental growth. ,There is certainly growth, the company is profitable and seems to be executing well within its markets, but I am going increasingly impatient with Ambarella’s penetration into robotics, autonomous cars and other strong revolution sectors. The deal with Taser (Axon, now) and the fact that Taser is trying to give free cameras to every police department in the united states provides enough of a potential catalyst that I am sticking with the stock for at least one more earnings report to see if there is any traction there.
  • Axogen (7) – What a terror Axogen has been on! I spoke with my friend , a hand transplant surgeon who uses, gets products and introduced us to Axogen, the other day when he had just gotten out of a surgery for something not related to hand transplants. He mentioned he used Axogen products in that surgery too to help heal a nerve in a women’s arm who had prior surgeries that left nerve damage. He had all kinds of numbers and sizes and what not that would be Greek to me at this moment as i don’t have that kind of training. I asked him how much he thought the little piece of Axogen tubing, nerve connector stuff, he used costs and he said he didn’t actually know but figured around $500 having seen the prices. I bet it was a $1000, $1500, or more having seen the prices in the medical industry over the last 2 years with Amaris being in the hospital so much and needing so much healthcare. Axogen remains a potential acquisition target and/or a company I just want to own anyway.
  • First Solar (7) – First Solar stock has really come back strong. It was a little early when I called for a potential bottom in the Solar stocks a couple months ago, but it does seem to have finally bottomed at least for the near term/mid term and its been on a nice move. I am holding on to my First Solar.
  • Twitter (6) –  Twitter is still struggling to monetize and grow but they still have so much potential as the leading, big data and real time news/updates from the hundreds of millions of people that are on the Twitter platform. I am still holding it for now.
  • Impinj (7) – This company reported terrific earnings report and the stock really responded. Stock has also gotten love from Barron’s which featured it a few weeks ago. They talked about how Impinj could become major player in the RFID industry, which can become huge. I wonder if the guy who wrote that article for Barron’s reads Trading With Cody because we have said that for months, when the stock was in the low $30’s and $20’s. I might trim some of this soon, just to lock in some of the 60% profits or so, that we have on the stock but it will be a partial small trim, if at all.
  • Lion’s Gate (7) – Lion’s Gate has also had some nice traction as of late and some good earnings/fundamental news. I will be in LA next week and meeting with people from and around Lion’s Gate’s various businesses and will let you guys know any incites I can.
  • Solar Edge (7) – Solar Edge is now up 40% or so since we bought it. Flirting with $20 a share today. The 3 month chart is a thing of beauty, which means I might be trimming a little bit of this one. As you guys know, I often like to buy the working card and to sell the most beautiful card.
  • The Street (7)- Nothing much has changed here. This is still a venture capital like investment in a company that is currently valued at less than $30 million. There are indications that the cash flow is going in the right direction and if this company, as I have said all along, could just kick off a few million dollars of cash flow from their $60 million dollar annual revenue run rate the stock could double or triple from here. I will give it another couple three quarters unless something drastic happens.
• Primary short portfolio
  • Pandora (7) – I covered 1/3 of my Pandora when stock was at new 52 week lows earlier this week. The company desperately tried to find someone to buy it but failed. The $400 million plus investment from Sirius XM came with a high price tag, costing company equity, interest payments, warrants and more. Existing share holders really are probably hurt by this deal, though Pandora needed to do something to survive even a couple years. I would short more if it gets over $10 a share. I still don’t see a pathway to profitability for this company.
  • Biotech ETF IBB (7) – Biotech ETF IBB has remained a good hedge and has not been able to rally along with the broader markets and it certainly hasn’t kept pace with our longs, which is a good thing considering we are short as they hedge against our longs. I mentioned the outrageous pricing in the healthcare and medical industry and Biotech’s are the perhaps the most egregious subsets in their pricing. I continue to think there is a secular decline in the profitably of most Biotechs and eventually the pharmaceutical companies like Fiser and Arch and other Opioid related drug dealers (my term, not there’s!)
  • South Korean ETF EWY (5) – This has not been a good hedge for our longs, which is what is was supposed to be. I keep thinking that the upside for South Korea has exhausted itself but we have to remember the bubble like action we see is the United States doesn’t happen in a bubble (no pun intended). It is all related and shouldn’t surprise us that a technology related smaller economy like South Korea has actually seen their stock market bubble too. This position has been keeping me up at night, so I am probably going to cover it this week.
  • HerbalLife (7) – The company recently admitted that they are not going to be able to grow as fast they promised and the implementation of the new business models that the FTC forced this company to follow is affecting growth. I am holding on to this HerbalLife, especially recent flip-flopping on growth targets. There might be more cockroaches under there.
  • Small Cap ETF IWM (7) – The IWM has been a mediocre, neither good or bad hedge, for our broader portfolio. I have been particularly shocked at its strength last week when large cap techs and momentum stocks were getting pummeled. I might actually end up adding to his hedge soon.
  • Valeant Pharmaceuticals (8) – *Tiny Position Same story: “I’ve been short $VRX since the $170s, as you guys know but I’ve covered most of it. I still think $VRX heads much lower. Back near its lows again, I’m holding my remaining short steady.”

Remember: 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 1/3 or 1/5 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 risk-taking 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-averse level.

Scaling into a position using an approach of buying 1/3 or 1/5 tranches over time is how I build my personal portfolio positions, but there’s no scientific way to go about investing and trading. Sometimes you have to pay up for the latest tranche but I try to be patient and wait for a temporary sell-off to add to the existing position.

** NOTE FOR NEW SUBSCRIBERS:

If you’re new to TradingWithCody or if you’ve been a subscriber for a while but haven’t acted on much of my strategies yet and/or 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?

Before you ever make any trade, step back and catch your breath before moving any money anywhere. Rank your positions and your whole portfolio and make sure you’re not about to make any emotional moves with your money.

If you haven’t yet read “Everything You Need to Know About Investing” then spend a couple 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, take a look at my own personal portfolio’s Latest Positions and slowly start to scale into some of the ones you like best and/or the ones I have rated highest right now. I’d look to start scaling into a few of the many stocks in the Latest Positions that are at all-time highs along with a couple that we’ve recently featured in our Trade Alerts that I’ve personally been scaling into.

You can find an archive of Trade Alerts here.