Tech Stock Thoughts #12: Reflections on Two Months of Stock Trades

Stepping down as the tech columnist for TheStreet in late December has given me the chance to write some quicker, more informal takes on tech news and trends, which I’ve been sharing over here. It has also given me the chance to trade stocks for the first time in a long time.

I’ve been disclosing long and short positions in companies when the companies are mentioned on this blog or in RealMoney columns. But since I’ve been getting questions from readers about the positions, I thought it’d be best to do a full disclosure of what I currently hold, as well as go over my investment thought process a bit.

At this moment, I have 25 positions — 12 long equity positions and 13 short equity positions. Until Monday morning, I also had a long position in Bitcoin, which for now has been converted into cash. The equity positions were all taken over the last 2 months, after I stepped down from my full-time role at TheStreet, while (aside from a quick sale and repurchase in mid-2019, when Bitcoin’s chart went parabolic) the Bitcoin position dated back to late 2018.

Not counting Bitcoin, I was up 17% YTD as of Monday’s close. Counting Bitcoin, I was up 29%.

My current long positions: Carnival (CCL), Facebook (FB), Fusion Acquisition/MoneyLion (FUSE), Groupon (GRPN), Mitek Systems (MITK), Norwegian Cruise Line (NCLH), Nutanix (NTNX), Osprey Technology Acquisition/BlackSky (OSTF), Royal Caribbean (RCL), Salesforce.com (CRM), SuperMicro (SMCI), Western Digital (WDC)

My current short positions: 3D Systems (DDD), Agora (API), BigCommerce (BIGC), Blink Charging (BLNK), Churchill Capital/Lucid Motors (CCIV), FuboTV (FUBO), FuelCell Energy (FCEL), Lemonade (LMND), Luminar Technologies (LAZR), MicroVision (MVIS), Nio (NIO), Plug Power (PLUG), QuantumScape (QS), Tesla (TSLA)

My long watchlist: Alibaba (BABA), Amazon.com (AMZN), ANGI Homeservices (ANGI), Applied Materials (AMAT), Baozun (BZUN), Bitcoin, Cohu (COHU), Eventbrite (EB), Ichor Holdings (ICHR), Micron (MU), ON Semiconductor (ON), One Stop Systems (OSS), Synaptics (SYNA), Ultra Clean Holdings (UCTT)

Some thoughts/commentary, none of which should be taken as formal stock recommendations or investment advice:

• As the short list makes pretty clear, I think upward momentum has been broken for many bubble stocks, Monday’s gains (amid a broad market rally) notwithstanding. With the benefit of hindsight, the GameStop/Wallstreetbets fiasco is looking like something of a psychological turning point for many newer investors who were convinced that their favored stocks would keep rallying to new highs, and the late-February selloff didn’t help matters. Throw in interest rate worries, huge margin balances, the potential for ARK fund redemptions to create downward pressure during selloffs, and a potential easing (perhaps already beginning) of the psychological factors that I think have fueled speculative frenzies in many assets since last March, and things could easily get messy.
• With the exception of Tesla (shorted in early February at $877), I’ve tried to avoid shorting companies that are clear leaders in markets with large and growing TAMs, even if they’ve come to sport steep valuations. I’d much rather short Agora than Twilio, for example, or BigCommerce rather than Shopify. I made an exception for Tesla due to just how stratospheric its valuation became, and could possibly make one for Snowflake if it crosses $300 again, but I prefer to have such trades be the exception rather than the rule.

Tesla’s historical forward EV/sales multiple. Source: Koyfin.

• Given how stimulus and reopenings could act as tailwinds for equities overall (at least until/unless inflation and Fed tightening start becoming serious concerns), I want to avoid being too greedy with the short positions. By and large, I’m looking for pullbacks to November and early-December levels rather than, say, July and August levels. Once those levels are generally reached, I’ll start covering and likely begin re-deploying at least some of that capital into longs.
• My current longs are split between six GARP-ish tech names (Facebook, Salesforce, Mitek, Nutanix, SuperMicro, Western Digital), four reopening plays (Groupon and three cruise lines) and two not-too-expensive SPACs (MoneyLion and BlackSky). With the exceptions of the positions in the cruise lines and BlackSky, which are relatively small, I took positions of roughly similar size in these companies. As expensive as many tech names have gotten, I think there’s still value to be found if one pokes around, particularly in names that are misunderstood, under-followed and/or look poised to see narrative changes.

Facebook’s historical forward P/E ratio. Source: Koyfin.

• My reasoning for betting on the cruise lines (purchased in January) as opposed to other non-tech reopening plays: Their stock prices were still well below pre-COVID highs (though their EVs were admittedly closer due to cash burn/debt raises); they have little to no corporate travel exposure; and they operate in a supply-constrained industry that’s likely to wield considerable pricing power as vaccines become widely available. However, since this is an industry that I haven’t followed much in the past, I opted for a basket approach to playing it as opposed to taking a larger position in just one name.
• Regarding MoneyLion/BlackSky (both fairly recent purchases), I’m admittedly a little worried about the near-term price correlation they have with more expensive/speculative SPACs. That’s the main reason I have a relatively small position in BlackSky for now. But each company does arguably have a reasonable valuation in light of its 3–5 year growth profile, and I think each has a differentiated offering for its core market (mobile banking/financial services for MoneyLion, satellite imagery/analytics for BlackSky) that’s made possible in part by out-of-the-box thinking on how to address customer needs.
• My biggest investment regret so far, which is hinted at by the long watchlist: Not going long some chip equipment stocks in early January. I’ve been positive on the group for a while, and actually made a bull case for Applied Materials just before Christmas. But in hindsight, I should’ve been a little more positive, given current chip demand/shortages, the capital-intensity of leading-edge process nodes and the ongoing push for localized chip production. If the companies pull back to late-December/early-January levels, I’ll be looking to buy.
• My other regret is not selling Bitcoin when its market cap crossed $1T (settled for ~$900B on Monday morning). I’d been waiting for a 10%+ one-day surge, but should’ve realized that’s much harder to pull off at current market cap levels. I think there’s still a long-term bull case for Bitcoin as a store-of-value/inflation hedge, and with PayPal and others throwing their weight behind Bitcoin as a funding source for transactions, it’s possible that real-world transaction usage grows meaningfully (in spite of Bitcoin’s volatility and capital gains treatment) if a jump in inflation makes a subset of consumers uneasy about keeping all of their funds in local currencies. But the risk/reward looks different at $900B than, say, $300B. And after last week’s selloff, it’s impossible to overlook just how much the current Bitcoin fervor is correlated with speculative manias in bubble stocks, smaller cryptos, NFTs, etc. There’s a good chance I’ll buy back in at some point, but I prefer to keep my crypto account in cash for the time being.

Bitcoin’s price history since my initial purchase. It’s been a wild ride, but I’m comfortable stepping off for now. Source: CoinMarketCap.

• As the watchlist highlights, there are a lot of names with secular growth drivers that I’d be open to buying if they pulled back some. I suspect many of them will do well long-term even from current levels, but just want to see the risk/reward improve a little more.

A few other notes:

• As mentioned earlier, buying and selling stocks is something I hadn’t done in a long time, and figuring out how to balance this activity — and the research it requires — with providing analysis about tech news and trends has been a work-in-progress. But going forward, I want to keep doing the kind of writing that I’ve been sharing via Tech Stock Thoughts to date, while also providing updates and thoughts about what I’ve been buying and selling.
• Please don’t take a position in any company or asset I mention without doing your own research first. I’m off to a decent start, but like anyone else, I’m bound to make some mistakes. The game isn’t easy.
• I’m always interested in hearing reasoned thoughts or constructive criticism from readers about my positions, as well as long or short ideas that you might have.