Fear v. Greed, UBER Earnings, HOOD's SEC Problem, And Much More

Here's the transcript from this week's Live Q&A Chat with Bryce:

Q: What are your predictions of where the S&P 500 is going to be at the end of summer, November, and end of the year? What’s your analysis behind your predictions?

A: If I had to guess the S&P ends the year around 4950. Mega cap earnings are good and will probably keep growing (at least for the tech companies), but any company with good fundamentals has a stretched valuation right now. There are basically no "buys" out there. Even our favorite longs (other than Tesla (TSLA) perhaps) look a little stretched to us. As we've completed this big portfolio cleanup over the last two or three weeks or so, we've raised a decent amount of cash, and we have yet to put all of that back to work just yet. We are looking for a pullback to put some of that back to work, but who knows if we get it anytime soon. This market/economy has been incredibly resilient for most of the last 18 months.

Q: Feet to fire: (1) Where does housing go from here over the next 1-2 years? (2) Where do rates go from here over the next 1-2 years? (3) Where do you see the market into year-end (elections) / 1-2 years out? Overall, curious on your take on valuations, general greediness/recency bias (everyone scared of a mass sell-off like 2 yrs ago) across interest rates, stonks and housing etc.?

A: I would say greediness is fairly high, but probably not at all-time highs. Home prices are already starting to come down in some of the hot markets like Austin and Phoenix based on what I've read. In general, I still think there is a lack of fear in almost all Americans. We've had nearly three years of full employment and wages are up for a lot of people, combine that with all-time highs in the stock market and sky-high real estate prices, and I'd say a lot more people are feeling relatively more wealthy right now compared to how they used to live. Obviously, this is a generalized observation and exceptions abound. I don't think rates move much from here and I think the markets could be slightly lower.

Q: Also, for purposes of the investment thesis, the AI writeups have been excellent! But how much does the strength or weakness in the AI score play into the overall investment thesis of the company?

A: Thanks! Writing these helps us crystalize our thoughts and be more objective with respect to each company. The AI score definitely plays a role in our overall investment thesis, as it encompasses a lot of the standard things that we evaluate with any company, like its Revolutionary rating, ability to scale, etc. Tesla (TSLA), Meta Platforms (META), Google (GOOG), and Nvidia (NVA) are some of our favorite longs and that is due in part to their AI score, but the valuations for everything but Tesla might be a little stretched right here as mentioned.

Q: An observation on my end. You both are very good at identifying when the market is overvalued and undervalued. However, the individual stock picks lately have not been up to the same standard. A few mea culpas and some positions that are in/out of the portfolio very quickly. This is not meant to be argumentative/confrontational. I believe in you both and want the best for everyone here!

A: Look, we are always trying to do better. Picking stocks is not easy. We spend lots of hours every day reading analyst reports, generating ideas, and analyzing various stocks. Sometimes we get it wrong. But I have to push back and say that we have still had some great winners, even recently like Robinhood Markets (HOOD), Tencent (TCEHY), and Transmedics Group (TMDX), and remember we were pounding the table on Tesla (TSLA) before earnings. We also continue to ride long-time holdings like META, GOOG, NVDA, AAPL, etc. I'd also add that we're a little cautious on the markets right now as we have been saying. We have been reducing positions deliberately because we don't want to have risk in names that we are not very, very confident in. Us and Warren Buffett are both in cash-raising mode right now, and I think we are going to get a lot more exciting pitches to swing at on the long side before the year is up.

Q: What are the top 5 buys and sells at the moment?

A: Not doing these trades, but if I had to: Top 5 buys would be Uber Technologies (UBER), Amazon (AMZN), iShares Bitcoin Trust (IBIT), Google (GOOG), and Tesla (TSLA). Top 4 sells would be Apple (AAPL), Transmedics Group (TMDX), Disney (DIS), and Netflix (NFLX). In no particular order

Q: Last week Cody said Tesla (TSLA) firing their entire 500-man Supercharging team is not something he is concerned about. I know that AI and robotaxi is the reason you are long-term bullish on TSLA, but I believe that other EV manufacturers adopting Tesla Superchargers will be the interim source of revenue for them before robotaxis and AI become their main source of revenue. So firing the entire Supercharging team and thus delaying the installation of more Superchargers is bad, no?

A: I estimate that charging might bring in $500 million - $1 billion in revenue in 2024 for Telsa, which is less than 1% of my estimated total revenue for the company in 2024. Plus, it's not a huge profit center for the company, as Elon has said at this point the charging network is basically there to facilitate auto sales. Elon is cleaning house at Tesla and steering the ship back on track, refocusing the entire team on autonomy at the moment. I trust that Elon knows how to organize the Tesla team in the best possible way to achieve the best outcome for the company. If you've read Walter Isaacson's Elon Musk biography, you know that Elon will not hesitate to fire even top executives if he wants to change directions. He's done this hundreds of times over the years at all of his companies, and they continue to grow and get better all of the time!

Q: Thoughts on Tesla (TSLA)?

A: Still love TSLA. What they are doing in self driving and with the Optimus robot is amazing. Obviously, it's going to take some time before those technologies start impacting earnings in a major way. That said, I think FSD adoption rates could go up a lot this year, and that would be a lot of high-margin recurring revenue for TSLA. Maybe by 3Q or 4Q we see FSD services revenue become meaningful.

Q: Picking up some Disney (DIS) this morning?

A: We are sitting tight on DIS for now. The earnings report was so/so and Bob Iger does not seem to have much to offer in the way of strategic vision for the company. We are evaluating what to do with DIS and will follow up on this next week.

Q: Why suddenly sour on Disney (DIS)?

A: For me it was listening to Iger on that last earnings call. I just don't know what his vision is for the company. Disney is attractively valued and has the capability to be very profitable, but it's going to take some big changes from Iger and team to get there. I wish he had conveyed a clearer vision for how he was planning on rebuilding the company. The problem is that he is sort of a temporary CEO, and unless/until the board picks a new CEO, I have a hard time getting very excited about DIS right now. That said, we are holding tight on the stock at the moment and will have a more comprehensive update when Cody gets back next week.

Q: Can you please provide full recaps of the Rocket Lab USA (RKLB), Disney (DIS) and Uber Platforms (UBER) earning reports?

A: We are evaluating RKLB and DIS as mentioned. Uber had a fine quarter and the stock is getting beat up because of a 1.2% miss on next quarter's gross bookings guidance. The gross bookings this quarter were actually a slight miss as well and UBER still beat on revenue, so I'm not sure a small downward revision in bookings is that big of deal. Not much has changed with UBER's fundamentals and it's pretty clear hearing Dara talk on CNBC and on the call that they really want to partner with Tesla once they get the opportunity. But Tesla still needs to get Level 5 autonomy close to figured out and Elon needs to decide how he wants to go market before any formal partnerships are announced. If Tesla downright refuses to partner with Uber and decides to go head to head with Tesla's own ridesharing app, obviously that's a problem for Uber once FSD is here. I think those fears are largely overblown and Uber has a lot to offer like its massive user base, AI-driven pricing/matching algos, multi-product platform, etc.

Q: Uber Platforms (UBER) hit. Y’all picking any up?

A: We have bids in for UBER around $60.

Q: Biggest question of the day!!!!! What is your feet to fire on today's Robinhood Markets (HOOD) earnings?

A: We like Robinhood into earnings as it's probably printed money with all of the crypto and stock market speculation recently. The company also probably added a lot of AUM this IRA season. That said, a lot of that could be priced into the stock and if the earnings are not spectacular, it could still sell off.

Q: Is the SEC on Robinhood Markets (HOOD)?

A: Yeah, the SEC sent Robinhood a "Wells Notice" which is "a formal notice from the SEC informing a recipient that the agency is planning to bring enforcement actions against them." The notice was related to some of the cryptos offered on Robinhood potentially being securities. Thankfully, Robinhood has done a much better job of vetting the coins offered on its platform than others like Coinbase (COIN) or Binance. Moreover, Robinhood is actually a registered broker-dealer with the SEC, also unlike Coinbase or Binance. Obviously, HOOD might get in some trouble if some of the cryptos are determined to be unregistered securities, but that pales in comparison to what will happen to COIN or Binance if the SEC wins those lawsuits claiming that the whole exchange is an illegal, unregistered exchange.

Q: Rocket Lab USA (RKLB) earnings report doesn't look like it's going to move the needle.

A: We were a little disappointed with RKLB earnings, most notably them moving the first Neutron test flight out to the middle of 2025 at best. RKLB is still by far the best publicly traded space company, but the launch business is extremely difficult. It seems like there is plenty of demand for the launch business, but the technical difficulty of launching tons of mass into orbit is a challenge not easily overcome. The space systems business seems to be growing nicely though...

Q: Rivian Automotive (RIVN) and Apple (AAPL) partnership rumor?

A: It's not clear how a potential RIVN/AAPL partnership would work. Could it simply be Apple Carplay in the Rivians? In any case, RIVN needs to figure out how to sale a car without losing tens of thousands of dollars per unit. To do that, it needs to scale up significantly. The company isn't predicting much unit growth in 2024 and it had to cancel plans for its Georgia plant because it doesn't have the capital to build it. We love the Rivian product, but the company is in a tough spot right now.

Q: Rivian (RIVN) a buy here? 2x cash.

A: See above commentary. Despite the sizeable cash balance, the company needs to raise even more cash this year to stay afloat given its current burn rate. And since it's not going to scale up much this year either, I just don't see how Rivian ever reaches the next level.

Q: Any thoughts on initiating a position in Shopify (SHOP)? It's down 20 percent today.

A: SHOP is a good company that is growing pretty fast but it still isn't profitable and it's not cheap. The company still has a 5-year price/profits ratio of 13 (using some optimistic assumptions), and we would like that to be high single digits. We're not buying any SHOP at these levels.

Q: Any calls or puts on your and Cody’s radar these days?

A: Mmm we've actually been continually cleaning up the portfolio which includes reducing a lot of our miscellaneous call/put positions. If you had to force my hand, I might pick up some more long-dated Pfizer (PFE) calls as the premiums are still cheap or some puts on Microsoft (MSFT) or Broadcom (AVGO) as hedges to our large-cap names.

Q: Wondering if there’s been any word heard on the Immersed IPO?

A: I checked today and one of the recent SEC filings had a May 7th closing date (which obviously didn't happen), but said it could be extended to August. I'm not sure what they are waiting on but hopefully we get some action in the next few months or so.

Q: This was put in front of me by a significant source with the justified warning that it is a new Fund within the fund family. An alt. investment fund if you can share insight for the chat? SPRING from Stepstone.

A: Here's what the Stepstone website says about the SPRING fund: "StepStone Private Venture and Growth Fund (SPRING) is a broadly diversified venture and growth strategy leveraging an open architecture approach, emphasizing best-in-class managers across all sectors of the innovation economy." Looks like this another private venture fund similar to the ARK Venture Fund (ARKVX). But the holdings look like a bunch of other private VC funds. Since we don't know exactly what SPRING holds, and it is illiquid, it's probably not for us.

Q: Is there a somewhat easy way to check the price of SKTLS?

A: Sure, use this link.

Q: I think a few folks mentioned this months ago, and I agree: it would be helpful to have a spreadsheet or something of trades instead of having to look through volumes of transcripts.

A: We are working on a way to send real time trade alerts in a quicker format. Sending emails with every single trade is not practical so sometimes when we are doing a minor trade in one of our names, Cody or me will jump in the chat room to post it. We understand that not everyone might see that at the same time, but it is the best method we have right now to quickly send an alert. We are considering using text messages, Slack, or something similar. Please let us know if you have a preference for how to handle this going forward!

Q: Thanks as always to you and Cody for your magnificent site/service. Now, just a nuts-and-bolts-curious-how-you-do-it query from a long-time sub. It's impossible not to be impressed by your detailed and wise recommendations/analyses… most recently, the series on AI/the Magnificent Seven. Wow. My question: to what degree do you rely on AI to put these together? And only if I'm not drawing any confidential stuff out of you, do you have (m)any other analysts? Whatever-SUPER impressive.

A: Wow, thanks for the kind words! First of all, there are no other analysts, just Cody and I. In terms of how I use AI, I use it almost every day for research purposes. I like to use ChatGPT to sort of bounce ideas across and argue with so that I can try and remain objective. Unless I explicitly say otherwise, I NEVER use AI to write articles, or even portions of articles, from scratch. I do all of my own writing because it forces me to formulate my random thoughts and ideas into reasoned sentences that I am willing to put on paper and let other people see. Plus, AI just does not know how to write like me, capture my tone, and many times it says things that I just don't agree with. At some point, the AI might get to the point that it knows how to write exactly how I want, but it's not there yet.

When that happens, I guess I'll just take a permanent golf/rodeo/hunting vacation! HA!