Stocks 05/2022

Catalysts, outlooks & speculation

[TL;DR Stock picks at the bottom]

I’m gonna be brutally honest. Transparency fosters a good discussion. My portfolio YTD (year-to-date) is down about 56%. Some of my speculative pre-revenue biotech & SPAC stocks were even down to lows of 70% from my cost-basis. My revenue-generating pre-earnings growth stocks have been pummeled too. However, my mega-cap play, TSMC (Taiwan Semiconductor Manufacturing Company), has only dipped to a maximum of 22% from my cost basis. I do not feel any FUD (fear, doubt, uncertainty) because I have CONVICTION in my picks. If anything, I feel as though I should average down more.

My Risk Tolerance

I am huge believer in the macroeconomic theory, although not stock picks, of Cathie Wood, CEO of ARK Invest. She lived and worked through multiple recessions such as the dot-com bubble and 2008 mortgage crisis. Her theory believes in disruptive technology bringing about infrastructural economic changes. For example, TVs and laptops have become significantly cheaper while providing better quality. Innovations like this bring about cheaper cost of living, cheaper input costs, and socioeconomic/cultural shifts. Right now the economy is undergoing more change than it has ever seen before. From renewable energy to big data AI analytics, it is a time of rapid development.

Additionally, all of my stock picks have something called a “first mover advantage”. This means that the company is the leader in the emerging industry and will in all likelihood get to market first. Which means that company will start generating revenue faster, and eventually profit, becoming a viable growing business. Moreover, these “first movers” almost always have considerable tech moats that set itself apart from competitors trying to catch up.

Catalysts

Positive

• Supply chain growth

  • Back-ordered supply coming in now into next year

  • Growing protective/domestic infrastructural investment

• Innovation & automation

  • Helping lower input costs for certain goods & services

  • Thereby bringing the costs of goods & services down

• US Federal Reserve

  • Let’s all pray J Pow saves us

    

Negative

• Increasing central interest rates

  • Borrowed money becomes more expensive

  • Discounted cash flow

• Inflationary pressures

  • Oil price staying high/political instability/energy dependence

  • Input/energy costs getting high

  • Purchasing power decreasing, especially for non-USD

  • Food costs getting high as a result

• Increasing demand/supply chain shortages

  • Hard to keep up with current rate of demand growth

  • Stagnating GDP? (bottlenecks)

  • Anti-globalization sentiments from some nations

Potential Outcomes

Price Stability

Stagflation

Real Recession

Summary

This is not the time for speculative plays. Increasing central interest rates have made money more expensive to borrow and is discounting cash flow on future earnings. Real estate will continue to fall as mortgages become less attractive. Strong financials like revenue growth, increasing profitability, increasing assets, and decreasing debt will attract safe money. Mega-caps have always been my favorite pick no matter the state of the market. The money snowball effect and walled gardens of Big Tech keep the firms hardy.

P.S. I wouldn’t touch crypto for awhile. Keep an eye out on Monero and GameFi from AAA studios.

High Watch

USD: It is a precarious time right now. Good to have cash on hand

TSLA: $600 and below (now $200 and below: 1 to 3 stock split)

• In 2021 Tesla delivered almost 1,000,000 vehicles

• Giga Berlin & Giga Texas recently opened

  • Chip like factory lay-outs (compact, flow-through)

  • Each factory adds about 500,000 vehicles a year

  • Plans to build more Gigafactories

• Cybertruck enters production next year

• Semi & Roadster supposedly coming soon

• DTC (direct to consumer) business model/replace dealerships

  • Proprietary service shops & charging stations worldwide

• Proprietary insurance services/AI safety monitoring score

  • Teach drivers to be safer/reduce their insurance bill

• Aggressive vertical integration: materials in, products out

  • Advanced manufacturing engineering & innovation

  • Automated & simplified processes

• Leading computer vision/steady progress on FSD

  • Proprietary AI training chips

  • Once FSD is more rigorous & regulated robo-taxis will threaten Uber & Lyft

  • Tesla Bot supposedly starting into next year

• Home energy products stalling likely due to supply constraints

  • Commercial storage solutions installed worldwide

• P/E around 100 (high, but extreme growth phase)

TSM: $80 and below

• Pure monopoly on semiconductor fabrication

• Clients include Apple, Microsoft, Google, Nvidia, AMD, Intel, Amazon, Facebook

• Only single competitor is Samsung

• Huge investments in new factories in US & Taiwan

• P/E around 20

ASML: $500 and below

• Pure monopoly on EUV lithography

  • No other way to make 5nm chips & smaller

  • Barrier to entry/R&D costs make it impossible to compete

• Clients include TSMC & Samsung

• P/E around 35

GOOGL: $2000 and below (now $100 and below: 1 to 20 stock split)

• P/E around 20

  

AAPL: $125 and below

• Apple is Apple

  • Insane walled garden

  • Apple Car?

• P/E around 20

VALE: $12 and below

• Direct deal with TSLA to mine nickel ore

• Global leader in iron ore

• Dividend up to 17% now

• P/E around 4

DCA (dollar-cost averaging)

“Time in the market beats timing the market”

(average in)

Ideally, if you can, buy these stocks in regular intervals. Yes, buying during dips and ideal price points is awesome, but no one really knows if the stocks gonna up, down, left, right or implode. Instead, take a portion of every paycheck and invest it into the positions you believe in.

(average out)

As prices rise realize that it is an inherent risk as your profit accumulates. Once it gets to target price levels start selling off portions of your positions. Depending on your level of conviction in these positions sell accordingly. For a company like GOOGL I may honestly never ever sell my shares.