A Couple Quick Thoughts for 2025
Tech stocks had another incredible year. Here is what we need to do to be even better investors next year.
We'll do the Live Q&A Chat at noon ET on Thursday, January 2, 2025 in the Discord Channel or you can email your questions to support@tradingwithcody.com.
Bryce here. 2024 is almost in the books and it turned out to be another incredible year for the markets, and tech stocks in particular. Even with the recent small pullback, the Nasdaq 100 is still up about 27% on the year, and the CNBC Mag 7 Index is up about 72% year to date. Simply incredible.
We've been invested in six of the seven Mag 7s for many years (Tesla (TSLA), Nvidia (NVDA), Apple (AAPL), Meta Platforms (META), Amazon (AMZN), and Google (GOOG)) and these are all "Forever Positions" for us. Even though it seems obvious in hindsight, remaining invested in these megacaps was a fantastic trade for the last two years. We stayed invested in these names even as almost everyone else was betting on a "rotation" out of the Mag 7 to other names, or a "broadening" out of the market. And we loaded up on TSLA all summer when everybody was hating it. Despite the outperformance of the Mag 7 (and TSLA), if you turn on CNBC or Bloomberg today you'll hear most analysts continuing to say the same ole thing. Sometimes the best trade is the most obvious (like continuing to own the best tech companies on the planet perhaps?).
Even though it's been a phenomenal year for tech stocks and almost everything in the TradingWithCody portfolio, we can always do better and we spent some time over the last few weeks thinking about what we need to do to be even better investors in 2025 than we were in 2024. Here's two of the big themes that we are focusing on:
- Make Big, High-Conviction Bets
We have to have the courage to make big bets on the stocks that we believe in the most. We have been moving in this direction all year, and remember that at one point earlier this year we had closer to 30 names in the portfolio compared to the 14 we have now.
The key here is that when we have high conviction in a name, we have to match that with above-average position sizing. This is exactly what we did that earlier this year as we were pounding on the table with Tesla and buying the stock what seemed like almost every day for weeks on end when the stock was down 40% on the year at one point.
It was painful to buy more Tesla when the stock seemed to do nothing but go down everyday. We have to remember that investing is never easy and if we want to do well, we have to be willing to take the pain that comes when our favorite stocks inevitably rotate out of favor with the market. And importantly, we have to seize on those moments to build big positions in spite of the pain we feel at the time.
- Trade less, read more, think more, and think big!
When the markets are your profession (and even for those who just do investing/trading on the side), it's easy to feel like you must be trading all the time, and that if you are not trading somehow you are not doing your job. But most of the time, nothing could be further from the truth.
The temptation to trade is a constant in this business, but our long-term success rarely comes from our trading skills. We've done the best over the years by finding Revolutionary companies that end up creating trillions of dollars of wealth and holding them forever (like the six of the Mag 7 that we mentioned earlier).
Our job is really twofold: (1) continue to hold the best Revolutionary tech companies long term; and (2) find the next Revolutionary companies that have the potential to create trillions of dollars of wealth and buy them before they go mainstream. Notice that daily trading is not part of that job description. That said, we also have made some alpha over the years by hedging the portfolio and using short positions on crappy companies, which by its nature means we do have to trade sometimes.
Cody's daughter, Lyncoln, told us the other day at dinner that "Your job is to predict the future. That's a weird job." In order for us to do our job and do it well, we need to use our minds to essentially predict the future of technology. We have to answer questions like: What are the biggest tech trends happening right now? How will those tech trends impact other industries? How fast will they happen? Which companies are driving and/or benefiting from these tech trends?
To do this, we have to spend more time thinking, reading, and listening to others. There is no guarantee that we will catch the next Apple or Tesla before they go mainstream, but we can guarantee that we won't catch those stocks if we spend all of our time and brain cycles on short-term trading. And we have to avoid chasing small cap theme stocks that are wildly more risky than the stock we focus on.
We have to think a lot, and we have to think big. Remember when Cody said fifteen years ago that Apple could be the first trillion dollar company and everyone laughed at him? Now Apple is approaching a $4 trillion market cap. What will be the first ten trillion dollar company? We predicted in our book that Tesla could be a $30 trillion market cap by 2040 by the way...
That's it for now folks. See you in the Live Q&A Chat on Thursday!
