Here’s an update on some stocks I’ve been talking about on MarketWatch, most of which I have positions in.
In April, I wrote: “The many charts that had become hockey sticks are now looking sort of like the rocky mesas in northern New Mexico, with a slope down potentially ahead. Many good companies’ stock prices have come down some 30%-50% in the last week or two, and that means there have been some buying opportunities developing as I’ve noted in the past week too. But be careful out there. I’m not sure we’re going to see the recent all-time highs for many stocks that are now probably in bear market territory.”
There are literally thousands of non-S&P 500
SPX,
stocks that have fallen 70% or more since their highs earlier this year. A lot of speculative money has been wiped out and I continue to find some select opportunities to buy Revolutionary stocks at what could turn out to be very reasonable valuations.
Note that I lowered the investment rating for real estate to a 7/10 from the 8/10 that I had kept it at for the last decade or so. I think real estate prices are going to stagnate or decline in many parts of the country over the next five to 10 years, but I still think real estate in general, especially land, is a great investment long term.
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.” The positions that are bolded are those that I consider to be “core” holdings and am unlikely to ever sell them.
‘Forever’ assets and other permanent holdings
- Media, hedge fund and other private investment/business holdings (9-plus because betting on yourself and running a business is always a best bet)
- Real estate, including the office I work out of, some land and the New Mexico ranch I live on (7)
- Physical gold bullion & coins (8)
Driverless Revolution
Tesla Inc.
TSLA,
(7). In the prior Latest Positions update, I’d noted that: “We are clearly in an EV bubble right now. Tesla is not as wildly overvalued as some of the fake and/or fraudulent EV companies out there.” The EV bubble has popped and most EV stocks are down 70% or more from the levels at which they were trading earlier this year. Meanwhile, Tesla has actually rallied 20% or so since April, it’s still 20% below its all-time high earlier this year. The move from radar-assisted driverless technology to straight vision driverless technology has been a bit surprising, but Elon Musk’s probably on to the right idea. And we have made a long-time successful bet on his technological approaches — he’s proven himself right so many times in the past. If Tesla cracks the driverless code before anybody else, the stock will go up another fivefold.
Space Revolution
Virgin Galactic Holdings Inc.
SPCE,
(6+). Virgin Galactic has proven how hard it is to get into (almost) space but after finally achieving a successful test flight and also successfully sending Richard Branson up into (almost) space, the company has finally proven its technology is ready for commercial use. You might have noticed that over the weekend, our former holding, Astra Space Inc.
ASTR,
failed in its latest attempt at sending a rocket to space. And as the CEO tweeted, “… Space may be hard …” Long-time followers know that I wanted Virgin Galactic to do a secondary offering earlier this year when the stock hit $60 and the company’s market capitalization would have supported a billion-dollar cash raise. The company has finally done the secondary, though the way they handled it — announcing it immediately after the stock popped on Branson’s flight and in the midst of the SPAC bubble’s crash — hasn’t helped the stock. But the cash is what’s important to the long-term success of the company, not the current stock price.
Rocket Lab USA Inc.
RKLB,
(8). While the aforementioned Astra hasn’t been able to get its launches going, Rocket Lab keeps plowing along and sending up more satellites. The company completed another successful launch on July 29 and has another one scheduled. The “Love at First Insight” mission will be Rocket Lab’s 22nd Electron launch overall and fifth mission of 2021. This will be the first in a rapid succession of scheduled Electron launches from September through October that represent the company’s fastest launch turnarounds to date. We’ve been early in getting into the Space Revolution, but as I look at the potential risk/reward of most tech stocks against a company such as Rocket Lab its proprietary technology in a burgeoning trillion dollar space economy, I want to buy more. I will turn a large position into a huge one if the stock gets closer to $8. I’m looking for 100-baggers that change the world as they grow, and Rocket Lab and other companies in the Space Revolution are perhaps best positioned for that kind of potential return.
Osprey Technology Acquisition Corp.
SFTW,
(Black Sky Aerospace) (8). Black Sky lost two satellites during a recent failed launch by Rocket Lab, but the company remains on track to have a constellation of 23 high-resolution satellites by the end of 2023, capable of monitoring the most important locations on Earth every 60 minutes from dawn to dusk. The valuation of Black Sky will be $1.1 billion after the merger with Osprey and with the company looking to double revenues this year and next, we’re looking at a stock trading at about 8 times 2022 revenue and 4 to 5 times 2023 revenue. Black Sky’s gross margins are likely to be above 70% or more and that means this stock could end up looking very cheap if they grow the way they expect over the next five years.
Genesis Park Acquisition Corp.
GNPK,
(Redwire) (8). Redwire is a supplier to the space industry, already does $120 million in annual revenue and is looking for 30% topline growth this year. The company expects that growth to accelerate over the next couple years, taking sales to $1.4 billion in 2025. With much lower gross margins than the aforementioned Black Sky, this stock rightly trades at a discount to SFTW, with GNPK currently being valued at five times 2021 revenues and “only” at 3.5 times 2022 revenue. If the company can actually deliver $1.4 billion in sales in 2025 at a 35% gross margin, we’d probably be looking at earnings of $200 million or so. Throw a 10 to 15 multiple on those earnings and you’d be looking at a $2 billion market cap or a stock trading probably around $40 or so in four years or so.
SpaceX (9). I am including SpaceX in the Latest Positions roundup because even though it’s a private company that my hedge fund has invested in and most retail investors can’t get into, it’s by far the leader in the Space Revolution and I want to start keeping a record of my analysis and ratings for the company. SpaceX remains by far the leader in the most obvious and largest potential marketplace in which to invest for the next 10 to 20 years.
Defensive names
SPDR Gold Shares
GLD,
GLD (7+). Nobody wants gold. It’s the butt of jokes when I talk to retail investors and even to some hedge fund managers. But I tend to think that when the alt-coin bubble crashes (90% of the cryptos out there right now are likely headed to $0 in the next two to three years) that gold will be taken seriously as a store of value once again. I’ve owned both bitcoin and gold for many years and plan to continue owning both in the hedge fund and in my personal account.
Bitcoin
BTCUSD,
(7-). I’ve said since 2013 that bitcoin is and remains the de facto standard cryptocurrency of the world and therefore remains the currency most likely to replace the U.S. dollar as the world’s reserve currency in coming years. I had mentioned in the last few months that I would look to buy more bitcoin if it dropped below $30,000 and both happened a few weeks back. I’m sitting tight on bitcoin now, would look to buy more again below $30,000 and would likely trim some above $50,000.
Cody Willard is a columnist for MarketWatch and editor of the Revolution Investing newsletter. Willard or his investment firm may own, or plan to own, securities mentioned in this column.