Bitcoin, Warren Buffet’s 13F, Chevron (CVX) and Hedge Fund Strategy

Play episode
Thoughts on Bitcoin (BTC), Warren Buffet’s 13F, Chevron (CVX) and Hedge Fund Strategy.

Bitcoin, Warren Buffet’s 13F, Chevron (CVX) and Hedge Fund Strategy

02/17/2021

Podcast Transcript


Hey, this is Jeffrey with another edition of Stock Smart, February 17th, 2021 edition. Hope you’re all doing well, markets unwinding a bit today. As you know, the S&P oscillator, as we’ve been talking about, is overbought. You can take a look at the constant creep up in the 10-year again, which is an indicator, once we see the 10-year get a little bit higher when we get it into the 2-3% range. Then investors in equities will really have to start being concerned, as the, you know, as people look to invest in safer havens,

[00:00:28]
Like the 10-year, people will be pulling money out of their equities and looking for safer places. VIX is up again today, about 5-6%. So again, that creep is also a little bit of a warning indicator that we may head into it downturn a little bit in the market. We’re about down about 70 basis points today, watch for a continuing unwind for the next week or so. And then I would say the troubling period really looks like when we get into the out of earnings which will be in the next two weeks and we’re going to hit that low period.

[00:00:59]
I really think that we’re not going to have as many buybacks because there is concern about corporate taxes potentially going up and if that is the case then companies are going to want to preserve their wealth, especially in the first quarter. Let’s look at Bitcoin for a second. 5% of CEOs surveyed by Gartner. Gartner research, said that they will consider putting Bitcoin on their balance sheet. Again, so you’re seeing a trend and a movement where people are moving in to and companies are moving into the idea or taking note of the idea that they could potentially have Bitcoin as a currency that they either take for payment or put it on their balance sheet as some type of an investment. 84% those said they would not, so it’s not widely adapted yet, but it’s starting to be thought about more.

[00:01:47]
EV battery technology QuantumScape, stock we talked about last week, moving up one of the few stocks moving in the right direction today, up about 5-6% today. QuantumScape released, their earnings were still poor. They’re sort of pre-revenue because you know, their technology isn’t quite to market yet to be sold, but they had some really interesting information they released about the prototypes for their batteries. So they’ve created a multi-layer solid-state battery and the capacity and retention in the multi-layer battery that they’ve been testing in the prototypes, increases the battery life. So that’s really excellent technology.

[00:02:24]
So we all know how limited, when we have if you’ve had an electric vehicle how limited the charge will be, 2-3 hours and then you have to stop and if you get a supercharger you can recharge but as the battery technology becomes better and better you’re going to start to see more and more people going to EV cars. It still appears to be an inconvenience. Some people will never want an EV car. Some people will want the sound and feel of a real engine and you know that’s something that an EV car does not have, but as technologies like what QuantumScape is developing start to get better and better and EV cars can run for longer and longer periods without charging you’re going to see more of a demand for electric vehicles. So again, it is the future it is coming.

[00:03:07]
They are also they are they are building a pre-pilot line in San Jose which is like a pre-production line. Essentially they’re building the prototypes there, it’s not a full plant. So they’re also and one other thing about QuantumScape, they’re getting into vertical takeoff and landing gear, meaning they’re essentially either helicopters, batteries for helicopters or airplane or air travel so that could be a space where QuantumScape starts exploring. Now we talked about the Berkshire Hathaway 13(f).

[00:03:32]
It did come out yesterday. There weren’t a lot of surprises in it, they raised their stakes in companies like AbbVie, Bristol-Myers, Merck, which is a stock that I talked about in terms of the dogs of the DOW. Merck was one of those companies with the very good dividend, dividend Aristocrat and they raised their share from 22 million shares to 28 million shares and they also raised their stake in Restoration Hardware. In terms of new things that they got involved in. That’s really, those are the interesting positions. Buffett took a position in Chevron, and it’s new, about 50 million shares. We talked about this last week we talked about how and when we looked at the CPI that inflation or the rise in prices that energy prices overall

[00:04:17]
were up about 7% and Buffett,

STOCK WATCH

The stock that we focused on, rather than Chevron, we were in Exxon. Exxon actually did better. Exxon is up 50% or so over the last like 4-5 months if you start, if you got in it in November so Buffett did really well with Chevron as well. You know, this is the case where if you get into one of these positions now and Chevron was up a little bit today mostly on the Buffett news and people buying it. Did you miss it? So that’s the question, so let’s look at a stock that Buffett added in their holdings over the last quarter or so and that’s Chevron, or CVX. Our thoughts, or my thought is that

[00:04:59]
you missed it, if you’re going to buy it now, okay, but we’ve already seen the big energy price go up, when he bought the position, he probably bought it somewhere in the 70 range where it was a few months back and now it’s up at 96, so it’s up over 30% in the last like 90-120 days, now our focus again was on ExxonMobil, XOM. We owned it for a bit noted the inflation, prices were up again over 7% in the latest CPI. We were in Exxon around 32. Now it’s up about 50-52. So, you know, if you remember these are seasonal energy plays and energy in general, we’re hitting cold spike in Texas and the South so that increases energy prices then we’re also seeing a spike in cold weather in the Northeast.

[00:05:49]
So those are kind of like seasonal plays and that’s something I want to talk about in another episode.  With seasonal plays for stock, it’s a fundamental part of a calendaring system if you’re going to want to be an investor.

THE AVERAGE INVESTOR

So I got a question from Sally, and thank you for sending question, we continue to grow, the podcast is getting thousands of downloads and we appreciate that, getting 20 to 25 questions a day. You can send me questions at Jeffrey@JeffreyKamys.com and Sally wants to know when’s a good time to short a stock. Well, it’s really never a great time to short a stock. It’s risky and dangerous business. And essentially it exposes you to unlimited risk.

[00:06:30]
Remember if you’re short a position meaning you’re betting this stock is going to go down, you could be, let me give you a perfect example, if you were short Tesla last year and many were, Tesla had a big short position last year. If you were short Tesla last year and you’ve seen it go up and up and up. 100x, 200x that it’s gone up you would have lost a lot of money and so a short has unlimited risk,  meaning it could go to the sky so as high as the stock could go that’s how much risk exposure you can have in a short. So the risk is high, but let’s look at a stock. Let’s look at a strategy that a hedge fund would use in a shorting.

[00:07:10]
So when a company goes public with their IPO, and let’s use an example here. Palantir because that’s a great example, PLTR. Let’s say the stock has really done well since its IPO, which Palantir has done, Palantir is up 300% since it first was listed in September. Generally insiders will own shares of companies like that. That’s the incentive to be there. They’ll give gifts of stock or they’ll give them stock options if you’re an employee at the company and generally that’s a way to get talent. It’s also a way to cut your overall exposure to payroll expenses. So insiders are always looking at their stock as another salary for them. So Palantir is a great example of a stock that would be shorted by a hedge fund and let me explain the dynamics of this.

[00:07:58]
So when you work for Palantir. Palantir says, okay, you get stock options or stocks vested whatever in the company at X. So if you have Palantir at like $5 a share and now Palantir is up $20, 25, 30 a share, when the lock-up period expires and generally that’s either 3 months or 6 months. In Palantir’s case, it was a 6-month expiration and we’re looking at their lock-up period expiring approximately this week, either February 19th, somewhere around there. That’s an intriguing short for hedge funds. So hedge funds will start building your position knowing when the lock-up date expires, especially in a stock that’s done so well, like Palantir because once the lock-up expires that means insiders who own the shares who work for the company or were given insider shares that were locked up

[00:08:46]
For any reason can now start selling and so what you’ll see is you’ll see a supply of stock that hits the market. Supply exceeds the demand the price starts falling and so that’s a time when a hedge fund or a strategy firm will short of position. So, if you’re looking at Palantir right now, you may want to be careful that it could be a little bit volatile over the next couple weeks as Insiders start to sell their position and let’s look at a couple IPOs of the last year, Snowflake went public at $100-120 dollars per share September 16th and their stock doubled on the first day, it hit 390 in early December and then Snowflake had a partial lock-up expiration around December 15th.

[00:09:30]
Well the stock went down from its all-time highs, date finally arrived, stock dropped about 330 a share and was trading less than that. So Snowflake is one that got hit and people who shorted that benefited from that little opportunity when the window opened for insiders to sell their shares. JFrog, another company that went public same day is Snowflake started at $44 per share, closed at 65 or so on the first day, soared to the eighties in September also had a pullback when they had an early lock up period released around November 25th, the stock closed down that day. So this is the classic time when you would want to be in a short position.

[00:10:11]
I’m not recommending a short to especially to anyone because it is extremely risky business, but a hedge fund, a firm that has experience and knows what they’re doing or is going to put a short on that would be a time to put a short on. Hey keep the questions coming. Have a great day. Thanks. We’ll see you next time again on Stock Smart.

More from this show

Episode 16