Here is updated commentary for some stocks from the Revolution Investing newsletter analysis over the last few years, along with updated ratings. I’ll send out another batch of updates tomorrow.
The ratings for each stock go from 1 to 10, 1 being “Get out of this position now!” and 10 being “Sell the farm, I’ve found a perfect investment.”
Here’s the We-Were-FANG-Investors-Before-FANG-Was-a-Thing basket:
Google holding company Alphabet
is cheap on a lot of metrics, but has gotten more expensive during this months-long rally. The stock is trading at 25 times forward earnings estimates, and the 20% topline growth, even as the company now does nearly a quarter trillion dollars of sales each year, is impressive. Alphabet recently became a trillion-dollar market capper, but the stock has pulled right back since then — similar to the way Amazon’s stock did last year when it was briefly worth a trillion dollars.
I continue to point to Android and YouTube as perhaps the best reasons to hold onto our Google, which I’ve owned since the day it came public.
Remember when Apple
warned about earnings early last year and the stock, already down in the late-2018 market mini-crash, got killed and traded down to $142? And Jim Cramer was on TV saying something like, “AAPL should be at $120”? I love Cramer, he’s a mentor of mine, a friend, and gave me my first break on TV. But sometimes he can be late and wrong, just as any of us can be. Anyway, AAPL has almost doubled from those levels.
I would rather trim Apple here than buy it. In fact, I’ve added a few puts in the last month or two just to hedge this now very loved stock.
Amazon Web Services is perhaps the best reason to own shares of Amazon.com
Or perhaps it’s the retail business. Or perhaps it’s the growing logistics and freight business. Or perhaps its the Amazon Prime Video business. Or perhaps it’s the Amazon Prime business itself. Whatever your reason for owning AMZN, it’s probably a good one. Amazon will book nearly a third of a trillion dollars in revenue in 2020, up 20% from last year.
Amazon will pass Apple in revenue this year, and Amazon generates 50% more in revenue than Alphabet does, while Alphabet does 25% more in revenue than Microsoft
does. Each of these companies is worth about a trillion.
Netflix reported a strong quarter, though its subscriber growth in the U.S. and Canada stalled out a bit. Netflix rightly points out that streaming is still a small fraction of how people consume TV content but that it’s a rapidly growing industry as broadcast television and traditional cable bundles decline. The possibility of global subscriber growth could hit 10 million per quarter this year is keeping this stock in rally mode off the lows where we bought it.
Netflix is a truly great company, but it’s got to deliver some real earnings and cash flow in the next year or two or the markets are eventually going to get tired of funding it.
That said, the company could cut back spending growth on new content at any time and the billions saved would flow right to the bottom line. They can’t do that too soon though, as they need to keep establishing themselves as the de facto standard streaming platform now that the competition from Disney, HBO, etc., is arriving.
is probably my favorite stock here, near $135 as it has pulled back in large part because of people panicking over the coronavirus. Disney Shanghai is definitely going to miss its targets this quarter, for example, and traders look at that and sell the stock.
Meanwhile, the transformative Disney+ service is about to change the entire economics of this company. Margins in streaming can be terrific as scale hits and the impact of hundreds of millions of people paying a monthly recurring fee will likely help drive topline estimates higher for future years.
The Space Revolution
handling of the entire 737 Max tragedy has been disgusting. I’m sick of holding this stock and truly shocked at the emails that we’ve seen released that warned about the Max before it hit market. On the other hand, it sure looks like a lot of this crisis is already priced into the stock and if, IF, Boeing can start delivering Max jets again in the next year, there are many years’ worth of deliveries ahead.
All that said, it wouldn’t shock me to see Boeing stock get hit another 10%-20% before bottoming, even if everything works out. I’m selling all of this position and moving on.
Virgin Galactic (8)
Virgin Galactic Holdings
is moving its headquarters to New Mexico, about 120 miles from where I live. To be clear, I don’t invest in the company because of that, but it’s happening because there is a spaceport in New Mexico that the government has spent a quarter billion dollars on.
I’m fundamentally bullish about Virgin Galactic. I don’t care that it’s just about the only pure space play in the public markets. Virgin Galactic at $2 billion or $3 billion is a terrific risk-reward scenario. You have 100% downside. And if their vision works out over 5 or 10, 15 years, that stock could be up 100-fold from here.
It’s not about the $250,000 deposits that they’re getting for people that want to go and be one of the first to be blasted up and become sort of an almost-astronaut by going into almost outer space with the first ships. It’s about what that technology is creating and the ability to send new satellites up cheaply and ship packages around the world faster and all of the things that you can do if you’ve got the capabilities to change how we travel, not just to space but around the world through space.
Aerojet Rocketdyne (8)
The tectonic plates of society and the economy and the world have all put us in a position that in 2020, space is a real private-market phenomenon that we can invest in. I have invested in SpaceX and the private market. I’ve invested in Virgin Galactic. I own Aerojet Rocketdyne
which is a rocket company whose predecessors companies have been around for many decades, but still sells into the new industry. I am trying to find all kinds of space-related investment plays and ideas because it is the next, can’t miss, greatest, biggest growth industry that will create trillion-dollar economies that we’re sitting in front of right now.
Disclosure: At the time of publication, the firm in which Cody Willard is a partner or Willard himself had positions in some of the stocks mentioned above, although positions can change at any time and without notice.