Weekly Rant and CRM

As I’m sure you’ve all noticed, I haven’t posted for a while. I started a new job, which is stressful. The worst part about working from home is not knowing what to work on. If at any time I don’t know what to do at work, there are tons of better options either in my apartment or just outside. I mean this is Los Angeles; no one works a 9-5 here. The sun just doesn’t allow it.

You’re all probably going to hate me, but I’m going to post my returns over the last month just so you don’t think I’m making this up. I apologize for not really posting what I was doing; I was busy and I got lucky. Well, actually, you should all really just invest in whatever stocks I mention in the last paragraphs of these posts. Things I tend to not think too hard about do a lot better than things I analyze. I’m stoked I posted I was selling GME; if I hadn’t I’d look like a dummy. That thing has been going way up. It’s almost certainly due to a short squeeze, however. I don’t expect it to last, but, as the old adage goes, ‘the market can stay irrational longer than you can stay solvent’. Though finally their earnings came out and they dropped 17%. So, here they are:

(Note: there was an outage in data collection on Personal Capital – the light blue line gains are much more steady, it didn’t actually go up in a day, but the starting and ending values are correct).

As I’ve mentioned before, most of my portfolio is boring and left in untouched index funds and stocks that probably won’t go bankrupt because of a bad tweet. The light blue line is my fun money account tied to this blog. At the end of my last post I mentioned buying FUBO and PLTR. I must have been having a good day because I fat fingered both orders and bought a bit more than I planned. Over the last two months (mainly the last 40 days) I’m up 52%. I didn’t view these bets as risky – IPOs rarely lose 50% of their valuation in the first month – and in this case I’m up about 2.5x. I’ll probably dump PLTR soon as the short-selling research firm Citron tweeted PLTR, ‘is no longer a stock, but a full casino’. Honestly, in this market, a well respected research firm calling a stock overvalued is more a buy signal than anything else. So, do what you want here.

I’m holding FUBO for the long-term; I think it’s way undervalued and its sports offerings are fantastic. If they actually get into online gambling their $1.8bn valuation can easily be $18bn. Hulu, Youtube, AT&T, Sling, you name it – none of them are positioned to corner sports and sports betting. When live events are back, I don’t see how Fubo won’t be all over sponsorships, organizing events, or even securing exclusive rights to a variety of niche sports with an immediate opportunity for global distribution, and, yes, sports betting market making. I’m not even going to do a full analysis here as it seems like a complete no-brainer. Put in an uncomfortable chunk of fun money and wait. I also pay $60 / month for Fubo and it’s fantastic (kidding I split the account).

My Option Plays This Week

I’m looking pretty hard at CRM – that’s Salesforce. They got crushed after announcing they were buying Slack for $27.7bn. And by crushed, I mean their market cap dropped $40bn. Just do the math on that. Also, Slack is a fantastic product and allows them to take on Microsoft directly. Microsoft already has a fantastic CRM system – Dynamics 365 – that integrates nicely with their BI tools, which are also state-of-the-art. 

Side note, Microsoft’s growth over the last 10 years is astonishing. I was a hater because their OS is terrible and I thought they were going to just slowly burn their Office products until Google usurped them. Quite the opposite. In short, they rapidly developed effective business technology for both nimble, high-tech startups and software services for large tech companies who have valiantly pivoted to providing cloud and digital services as a first touch point to customers.

Back to CRM. They beat their earnings estimate by more than double the forecast ($1.74 vs $0.75). This is an easy win for analysts to give them an upgrade based on both strong earnings and strong positioning into a new market for big business. I’d even add this stock to your ‘boring retirement’ funds. I’m not though. That’s not why we’re here. I’m going for call options. I’ll buy calls at probably $230 expiring 12/18 and then more at $250 expiring maybe January. If you make 30-50% gains in a week or two, count yourself lucky and sell. This isn’t a penny stock that’s going to double over night and give you a 4000% return.

Minus today (12/9), the market is still unusually happy, so don’t get bummed out if there’s a sharp drop in the next few months. As I’ve shown in prior posts, small businesses have little to no effect on the stock market, so despite how absolutely terrible shutdowns are affecting small businesses, more virus cases will likely not put a dent in the market. Quite the opposite probably. I’m not passing judgements on whether or not shutdowns are the right thing to do, they just mainly affect small businesses and 90% of stimulus dollars are aimed at big business. This is a bit cynical, but the more small businesses and people suffer economically due to prolonged shutdowns, the larger the stimulus will likely be. That money will probably be directed at shoring up loan defaults for big companies. It’s easier to get $100mm from the government than $10k if you know the right people.

Another side note: I love the phrase ‘Limousine Liberals’. I’m sure all you Republican readers know this phrase well and if you’re a Democrat, or lean that way and are not aware of this phrase, at least think about it. Narcissism manifests in many forms and I think it does more damage to claim and shame moral high ground while some politicians completely ignore it themselves. It marginalizes the rare public figure who actually wants to make a difference and is willing to use their brain, reason, and empathy to do so. I figure most of you readers are liberals, so for the benefit of both sides, I urge you all not to condone public figures who act like this, especially now that the country has a chance to change its image. If you really believe we are ‘battling for the soul of our nation’ (maybe Biden’s only sort of decent campaign slogans, which, in general, have really gone downhill…and shouldn’t they choose one instead of micro-target slogans…I hate politics), our leaders should be honest with their own souls first. And we should all do the same.

I don’t really enjoy the show Mad Money, but any stock that makes Jim Cramer mad – either because he doesn’t understand why it’s up so much, or because he doesn’t understand the valuation – is a buy signal. Again, this isn’t long-term investing advice, but no index fund is going to jump 50% in a day. To be fair, he did say buy MRNA at $20, and I did, so he forever has a soft spot from me.

I should also note I was buying NIO calls and RIOT calls. I’m not even going to write about these because doing that is literally the same as playing roulette – the house is more likely to win, but, hey, if your number hits, you’ll at least 4x your money. Anyone else have any good casino bets?

Last note. I basically always have a 2 -4 week put on VXX. I think it’s broken; it always goes down. You won’t make a killing and if there’s a sharp drop in the market, you’ll lose the farm. But that’s ok, VXX always comes back down. Just make another bet and collect easy money.

Anyone buying AirBnb or DoorDash? I like AirBnB because they don’t own real estate, yet are primed for the 2021 Covid recovery. While Marriott’s and Hiltons deal with loan defaults, property tax reassessments and a huge number of full time employees, AirBnb will just be hoteling more properties. Plus, what better way to start paying off mortgages that are behind a bit. Yes, this is all grim, but let’s be honest with where money is flowing these days.

Sorry I’m rambling today, I can’t look at numbers anymore. Hit me up with some good bets; I’ll likely have some cash to gamble with after I get out of PLTR. That said, I know a lot of people going long PLTR now, so who knows.

Losing Money Fast; Making Slow

Why am I writing this? Well first, as you all should know, my ideas are important. Next, you may ask ‘Why shouldn’t I just read SeekingAlpha, ZeroHedge, the WSJ or some other financial news website for ideas and analysis. You should! I read them, but as a regular retail investor who cares more about my job than making a buck in the market, I just don’t have time to really comprehend analysis past a certain point. I appreciate analysts who can dissect financial statements and find that edge that only workaholic investment banker could, but how am I supposed to know whether or not the analysis is any good? Do I just trust the analyst? And if I did, then why doesn’t he just send out his portfolio and I match that? Funny how analysts and banks that cover companies never divulge what they actually hold. And for that reason, I’ll never fully trust them enough to trust their analysis.

So, where does my information come from?

All over the place. I read things casually, and then they might show up here. I just incantate information. I really don’t know. I’m obviously slanted towards tech, but open to new ideas and not afraid to research elsewhere. I take more of a ‘macro’ approach. I don’t investigate financial performance, build pro formas or even read that many 10ks (they’re basically out of date when they’re published anyways). That said, I might do those things…who knows?
What can you expect from these emails? Not much. Most of these ideas just sit around in my head and I feel they have been pretty damn useless. What you can expect is that I will tell you what I’m buying and selling and why. Who the hell makes a stock recommendation and doesn’t buy it? What has this world come to?

How often will you get them?

Maybe this is the only one. Maybe I’ll send two a week, month or year. Let’s have fun with it.

What’s the theme?

Generally, this wont’ be a how-to on portfolio allocation. Most of my money will be in cash, mutual funds or ETFs. This is my 10% play money that I want to 10x (I can almost guarantee you that will not happen). I also won’t owe anyone my left testicle if one of these ideas blows up. So let’s have some fun.

First up, big news, I sold about 65% of all of my stocks, like my entire portfolio, which is basically my whole net worth, last Friday. At the time of selling, my portfolio was in the same place it was last September. I figure, if 1 in 5 American workers just filed for unemployment, and I only lost gains over the last 7 months, that is a huge reason to celebrate. Also, what’s the upside for holding? The market could go back to all-time highs, where unemployment was 3% and I make 10-20%. The downside is market gets its impending financial reckoning and I lose 30 – 50% of my net worth. No thank you!

I didn’t sell some stocks, that is the stocks outside of my 10% risk money. I kept VHT (healthcare ETF), AMZN, BRKB, VPU (utilities ETF), VZ, T, VBTLX (Vanguard international bond fund), VTABX (Vanguard US bond fund), and 15% of my holdings in VTIAX (Vanguard total International Stock Index Fund) and VTSAX (Vanguard US Total Market Fund). Besides that, I only kept stocks in my home run fund. Let’s save the home run fund for later. That’s what this email will usually be about. I also bought $289 puts on SPY expiry July 17th. Yeah, I think we’re going down. I really hate bears though, so I’m hoping this sentiment won’t last.

First Pick! One Financial

Words of Wisdom: if you like something, find the thing that made the thing.
So if you think an industry will experience rapid growth, go figure out what powers that industry. Then, find out what powers that. Buy that. There will be a lot of firms at the edge of innovation, but they will all get their core resources from somewhere.

Let’s start with a OneConnect Financial. These guys are a Chinese company that somehow managed to get listed on the NYSE. They call themselves a ‘technology as a service’ platform for financial institutions in China. All of China’s top lenders use their technology for, well, something, and so do 99% of the tier down. According to them, they service things like channel sales, product, risk management, services and operations. They’ve got all the right buzzwords such as AI, blockchain and big data. Basically if you are a financial institution in China and looking to go paperless and online, this is your first stop, after the government of course. They’re growing and they are expanding in to Asia.

Here’s what I’m most excited about. China is investing heavily in an alternative to SWIFT. In short, SWIFT is a ‘society’ (hence the S) that provides a network that enables financial institutions worldwide to send and receive information about financial transactions. Basically if you’ve ever had to send an international wire, maybe to some shady-ass ‘services’ company in Mexico for spring break, you sent a SWIFT transfer. It probably cost like $30 and took 2-5 days. The key thing here is they send ‘information’. The ‘information’ usually passes through multiple banks, sometimes obfuscating how much money is actually included in the transfer. It accomplishes security through obscurity and is seriously outdated US tech. Believe it or not, US finance doesn’t like change!

The inefficiencies in SWIFT is one of the main reasons why people were so excited about crypto. Ripple was specifically designed for interbank transfers that are fast, secure, and cost the mining fee to verify the transaction (so less than $1). The Chinese want something better. Alibaba and Tencent have already built parallel banking systems and we are all increasingly using digital wallets. The US has fallen behind, drastically.

I could use this paragraph to give a bunch of stats about how Asian point of sales cash purchases are projected to fall by half by 2023 and last year mobile payments in Chinese customers paid $49tr in mobile purchases, up 35x from 2013, but what does any of that even mean. The point is the opportunity is huge. Some Chinese fintech firms will fail, some will succeed. I’ll make the bet on the software that powers these Chinese tech firms. Also, they were spawned off by Ping An, a $1tr Chinese insurer. These guys have spun off 35 companies and invest $160bn every year in R&D. Its no mistake OneConnect is positioned to win.

So all that’s great, but how do we know there is value (and really, still, what do they do?). They listed on the NYSE last December with analysts projecting 70% growth in a year. Today, they have a market cap of $5bn. To me, that feels low. Their net margin is -71%, but I really don’t have the time to figure out exactly how much of that is spent on future product or supporting existing customers. I’m assuming it’s a tech company looking for massive growth. And that’s the bet I’m making. I only own a little now, but I’m looking to add to the position as I free up some other short term plays (like my SPY puts) and the market, well, looks a lot different than it does now. If it pops, I’ll buy, because, well, FOMO.

Ticker is OCFT.
Ok, that’s my first rec. More to come!