Microsoft was a great company in 1999. It posted record revenues of $20bn, record net income of $8bn, and soared to a market cap of $615bn.
With that being said, if you had invested in Microsoft at the top of the dot com bubble you would not have seen a return on your investment until 2016.
I believe we are now in the midst of a similar timeline. Some valuations are through the roof without any grounding in reality. It is hard to know when it will correct but I am convinced that at some point investors will once again begin valuing companies as the value of their future free cash flows + a risk premium.
For this reason I am adapting my personal investment strategy from 100% long to 110% long and -10% short with some select picks.
I will be diversifying my shorts and limiting their initial notional value, wary of irrationality continuing. I expect this to be an investment strategy I can stick to for at least 1 year.
I'd love to hear any contrarian views to my thesis and any thoughts on my short picks or suggestions.
My picks (each will be -1% of my portfolio):
1. TSLA Not much needed to be said. Great company, love their products and direction. $800bn valuation is ludicrous.
2. SHOP $180bn valuation for $2.5bn revenue in 2020. 70% growth rate is great but where is my risk premium for my investment today?
3. UBER $113bn valuation with a -$22bn accumulated deficit. Gave up on self driving (their roadmap to profitability?) back in December. Propped up by SoftBank.
4. ZM $126bn valuation with $2bn TTM revenue and $400m net income. Guys, this is a company who offer video communication software. 0 MOAT or risk premium.
5. SNOW $85bn market cap, $489m TTM revenue and -$400m net income. For a data cloud service (hello have you heard of AWS/Azure/etc.?)
6. DASH $65bn market cap, $2bn revenue, -$200m net income. Financials aren't the most atrocious on this list but food delivery services (like ride sharing) are too location specific. No roadmap to global domination here.
7. LMND $10bn market cap for a "tech" insurance company with less than $100m revenue, -$100m net income. Their S-1 is filled with talk about their AI. Their "chatbot AI" on their website is a web form with a photo of a woman. Seriously?
Picks I am less bearish on but still considering going short.
8. ABNB $128bn market cap, $5bn revenue pre-covid. This one is hard for me. I like this company and think they have potential as a global business. Also a great pick post-covid. But I think $128bn is still too insane. Could be convinced otherwise.
9. NIO $94bn for the Chinese Tesla. Close to bankruptcy pre-2020 EV hype. Now has some momentum but $94bn worth? China growth can be scary though...
10. SPCE $13bn valuation. Richard Branson's pet project run rampant with a Chamath SPAC. Space, very cool. Return on investment is where sorry?
Submitted February 13, 2021 at 11:49AM by noodlesource https://ift.tt/3pgneBt
