Trade Alert: The Portfolio Cleanup Continues
If you cannot tell by now, we are aggressively cleaning up the portfolio which means making very, very hard choices with respect to our holdings.
And on that note, today we are selling Disney (DIS) and Cloudflare (NET) entirely. We are also selling about one-third of our Uber Technologies (UBER), and we are nibbling on a little more Tesla (TSLA) in the hedge fund.
First, on Disney. We really thought Iger would be looking to capitalize on Disney’s amazing potential and make it a Revolutionary company, but after listening to the last quarterly conference call and today’s meeting, we simply don’t think he’s got the vision to do that. It seems he’s a bit of a lame duck CEO and it’s unclear what he’s really doing at the company besides just cutting expenses and going status quo until the board finds a new CEO. Iger is a good operator, and Disney will probably be more profitable this year than it was last year, but it’s still got a long ways to go to rebuild the brand and start really growing again. It seems like Iger is most excited about the parks business and the cruise business than the potential for Star Wars robots and leveraging the incredible Disney intellectual properties. The parks and cruises are our least favorite parts of the Disney franchise. Furthermore, listening to him talk lately, Iger gives us the impression doesn’t seem to understand is that the market for viewership is more competitive than ever as super-innovative, deep-pocketed tech companies like Netflix (NFLX), Apple (AAPL), and Amazon (AMZN) continue to spend tens of billions of dollars per year making new original content. Disney has some amazing IP like Star Wars, Marvel, etc., but Disney cannot simply sit on its laurels and ride those franchises into the ground while its competitors create thousands of hours of new content every month.
Next is Cloudflare (NET). We think the underlying business is great, but we have continually been building our model for Cloudflare looking out at its potential profit in five years and after the last quarter or two, our price-to-profits model has gotten more expensive rather than less expensive. Cloudflare is really expensive if the company does not grow at 30% plus per year, keeps its 75% margins, and basically doesn’t grow expenses more than low single digits — and we are less than confident about that 30% topline growth number.
Regarding Uber, we think the fundamentals are still good and the valuation isn’t bad on a forward basis, but as we all know, there is this existential risk to Uber from none other than the most Revolutionary company on the planet (and our favorite long right now), Tesla (TSLA). We hope that Uber will partner with Tesla to bring robotaxis to market, but if Telsa just operates its own ridesharing app, then obviously Uber could be in trouble. We actively and repeatedly trimmed UBER when it was in the high $70s and $80s as noted at the time and we are not blowing out of Uber just yet, but we want to continue reduce some exposure for now.
Lastly, as mentioned above, we are picking up a little more Tesla as we want to build this up even more. We think the setup here is quite attractive given everything Tesla has going with FSD and Optimus and looking at the potential for those trillion dollar kickers even as most investors and traders worry about the near-term EV demand and Elon’s grating tweet storms. The economics of robotaxi are extremely attractive as we have written about extensively and the Optimus Robot has the potential to be a ten trillion dollar kicker (or more!)
That’s it for now folks. See you in chat later today at 3pm ET.
