Trades on 2020-07-24 and 2020-0727

Covered SIG puts going into expiry.

I was short some $12 SIG puts. I bought them back for $0.20 a contract going into expiry since I already have a reasonably large SIG exposure that I'm not really looking to further expand. (Actually, that was my limit order, I might have gotten filled at a slightly better price. I think they had a bid of $11.83 when I covered, so I gave the options market maker up to $.03 relative to what the equity market maker was asking which seems slightly steep to me for fifteen minutes or so left in the trading day when I covered -- though I guess technically, the options don't expire until Saturday morning.)

This was my only trade Friday, and I didn't really think it warranted its own write up.

Sold covered calls at $45 against remaining RDFN

I sort of understand why Redfin is up as a result of the pandemic, but at the same time I sort of don't. On the one hand, the online real estate services should benefit relative to traditional real estate services because of the lockdowns. On the other hand, Redfin has been investing into home flipping which means it's taken a direct exposure to real estate at quite possibly optimally bad timing. I'm looking to increase my exposure to REITs in the near term because they've sold off, and are largely trading below book. The market is treating RDFN and Z as though they didn't just take significant exposure to the same thing that is causing REITs to sell off. I've always been bullish Redfin relative to Zillow. I still am. My thesis when I bought Redfin was that I'm pretty confident that long Redfin short Zillow is a good trade, and that most of the time when I feel that way about two companies, it's a good trade, but the pure long position is better. That thesis has panned out since I initiated my position, and it's still intact, but I don't like the way either business has evolved. I think the home flipping angle is a high risk acknowledgement of defeat that will pad revenue in the short term, but is unlikely to translate particularly well into earnings long term. These aren't pure tech companies anymore. They're a very expensive mix of REIT and construction with a significant tech component. This wasn't true when I entered. My overall sentiment has gone from being bullish Redfin relative to Zillow while being mostly net neutral to being bullish Redfin relative to Zillow while being extremely bearish. I thought Zillow was a good short candidate two years ago. If you held a gun to my head and made me short a stock today, Zillow would be in my top 5, at least of the companies I can name offhand. (Apple, Beyond Meat, Zillow, Moderna, and Hertz. I own an Apple put, but other than that I'm not actually short any of them. The Apple put is more of a token gesture than an actual position. TSLA gets an honorable mention. As a long time Tesla bull, I do think that Tesla is ludicrously overvalued, but I expect it to do well in the short term due to S&P inclusion. I'm still slightly long Tesla, or actually, I have about 1% of my net worth invested in Tesla which is close to my median positions size because it's share price is so high, but I think of it as being slightly long because at this point I don't own many shares. I expect Tesla to peak at about $2500. I want to try to time the peak, so I'll sell all but one share if it hits $2000 in the next few months, and sell my last share at $2500 if it gets there, but... I think Tesla should have a market cap of less than $100 billion. My investing philosophy is still to bet most of my money on the belief that the market does the right thing while investing a little bit on my belief that people are fucking crazy and ETFs are structurally stupid.)

So anyways, I remain way too long Redfin. I've sold covered calls against the whole position. I hope they all get exercised. I'm not convinced that Redfin's business has evolved in a way that should have resulted in its valuation increasing since I bought it, but I'm up more than 100% on the position. I'd still buy again at my entry price if it goes back down that low, but selling a call rather than just closing my position on Redfin represents a continuation of my "people are crazy" thesis. I really feel like I should have already sold. I felt that way when I sold my first set of calls. I feel that way even more strongly today, and Redfin is up since I sold either of those. So far, I've always been happy I sold covered calls rather than liquidated in stocks I thought were valued crazy high. Here's hoping that trend continues.

Bought 3 Recommendations from Motley Fool Blast Off 2020

I subscribed to Blast Off 2020, last week when I initiated my position in X0.

These new positions are being labeled.

X1: a social network that I'm actually planning to start using significantly more actively in the next year.

X2: a medical device manufacturer. (Good general rule: Always buy David Gardner's recommendations for medical device manufacturers.)

X0 (This is the same X0. I increased my position. It's basically flat. It was down slightly when I increased my position this morning. It was up slightly by EOD today. I'm super bullish this sector and have been since even before I started subscribing to any of the Motley Fool's services... although the company I like best in this sector is private. By the time I sell, I'll feel comfortable naming the sector, but I think the fact that I initiated this position based on the idea that it is David Gardner's #1 overall recommendation means that I shouldn't even narrow it down to sector, particularly since I don't know any public companies that have significant exposure to this sector as a fraction of revenue that they don't recommend in some way or another whether or not they consider them to be timely buys. Actually, that's not quite true. My second largest exposure to this sector is a recently IPO'd Chinese company that I don't think they've recommended yet, but I'd expect them to do so soon, but they aren't quite as bullish China as I am, I don't think. I expect China to be the world's biggest economy by 2030, and I expect the shift in its GDP growth to accelerate relative to US GDP growth when this happens. It makes increasing sense for the RMB to become the world's reserve currency as the Chinese economy grows, and the shift from the dollar to the RMB as the world's reserve currency ought to be the biggest macro-event that transfers enormous amounts of wealth in my lifetime. Roll over Bitcoin: you're not the next dollar. The next dollar is the RMB.)

Sold my remaining CVNA

I think CVNA is still going up in the short term. I think it's still going up in the long term too, but I'm not convinced it will outperform the market in the long term, and I'm much less bullish on it on the remaining stocks in my portfolio in the long term given its current price.

My thesis on Carvana remains that I think it should ultimately be worth more than Carmax. It currently is worth more than Carmax. It was worth a lot less than Carmax when I bought it. If it falls to the point that it no longer is, I'll likely reinitiate a position.

Reduced my VIRT and IBKR positions

I continue to believe Virtue and Interactive Brokers are undervalued and that they are fantastic hedges against another crash with the associated uptick in volatility that that would entail. Nevertheless, these were and remain two of the largest positions in my portfolio, and since I'm bullish everything in my portfolio (at least in the short term since ETFs are structurally stupid), I decided to reduce my exposure to two of my biggest positions that are as large as they are more because they serve as a hedge than because they are two companies that I think are particularly well positioned for the future.

I didn't sell these positions because I'm less bullish. I just sold them because I think I've found better places to put my money.

Bought BABA

Tencent was down significantly again today, causing me to look at it to make sure I still believe in my thesis on it. (I'm net up significantly still, but I just like to revisit thinking about my biggest movers.) I do. My thesis is basically Tencent is ludicrously undervalued compared to Amazon. They have similar revenue growth, but Tencent has a much better valuation, is growing market share in its highest margin business, is a much higher margin business overall, and has stronger revenue growth. This made me think about comparing BABA to AMZN since the comparison is pretty obvious, and lo and behold, Alibaba also looks ludicrously undervalued compared to Amazon. One might think Amazon is overpriced at its current valuation. I have no opinion on the subject. I am not long Amazon, but I am also not short, and don't want to short it even as a token gesture. I expect it tot fall in the next 24 months. I expect it to be the most valuable company in the world ten years from now unless Alibaba or Tencent is. If I was forced to either short Amazon or go long, I would go long, but I prefer to have no direct position and just invest in other companies that I think it makes look relatively cheap.

I didn't realize before I started looking into it today that Alibaba has seriously entered cloud computing. I still think Microsoft is the long term biggest winner in cloud computing, but it's interesting to note that not only has Alibaba entered this space, but of the four largest players, it is the one that has gained the most market share in the last year. Amazon is the only one that has lost market share (however, it's still grown 33% year over year). The big four have net gained market share this year as well, so this might be real weakness on Amazon's part.

(As a person who believes that people are crazy and that people make decisions about which company to use for their cloud development, I still believe Microsoft will net come out on top in cloud computing. However, as a computer programmer, I would lean towards IBM or Google if I was going to host an application in the cloud and my only considerations related to how much I liked the platform I was using and its cost. Amazon has the advantage that it clearly has staying power and that's my biggest question mark with Google, but seeing it gain market share again makes me feel more comfortable that they are a good choice.)