Investing Update: Why I'm Buying Coinbase
What I'm buying, selling & watching
Year to date the S&P 500 is now up 25%. Who would have imagined that after the year we had in 2020, that 2021 could be even better?
Seth Golden tweeted this excellent chart on Twitter recently. It puts into context how consistently well the overall S&P 500 has done.
Since 1928, the S&P 500 has experienced positive years 73% of the time. Negative years 27% of the time. That’s 68 positive years and 25 negative years.
The next time someone tries to scare you about investing or tell you how the stock market is going to crash, just remember this chart. Don’t play into their doom and gloom. Keep staying long the market and US businesses.
Inflation Rate vs 30 Year Mortgage Rate
About a month ago I wrote about how inflation was here and to expect it to start showing up more by affecting prices. Since that post (link below), it seems you can’t read or watch any news without seeing inflation plastered all over. You’re also seeing it in just about anything that you purchase.
This week I got my price back for a whole house generator system. It was a bit higher than I expected. Then my electrician proceeded to inform me that a year ago the generator would have been $2,000 less. In one year the generator alone has spiked almost 40%. Now do you think that generator will ever go down in price? I sure don’t! If anything over time it will just become more expensive.
Ben Carlson put together a great chart. It shows where the US inflation rate has gone vs the 30 year mortgage rate. I think it’s clear that there is going to be some interest rate activity in the near future. I’m a little surprised rates have held at these levels.
Moves I’ve Made
Coinbase (COIN): I’ve had my eye on Coinbase for sometime. I’m a fan of Brian Armstrong and his forward thinking as a leader. It’s becoming more evident to me that Coinbase is how institutional investors are getting their crypto exposure. That’s how I also want to get more exposure to crypto.
Going the Coinbase route gets exposure to the entire crypto market because when most buy and sell any cryptocurrencies they’re using the Coinbase app to do it.
I decided to start my position after it sold off after it’s most recent earnings. Late this year they’re planning to announce an NFT marketplace on the platform to take on OpenSea. I wanted to be in the stock before that was announced and started.
Disney (DIS): This has been a long time holding of mine. After it’s recent earnings the stock has pulled back and I felt it was a good time to add to it. This stock has been judged solely on it’s Disney+ subscriber numbers. It seems like they are giving no consideration to what will be coming back with the parks and media getting back to normal. Plus in having a 3 and 5 year old I see the Disney magic and the appeal is still there and it’s as strong as ever.
Starbucks (SBUX): In my last investor update I had stated that I had cut my position in Starbucks. After it had a recent pop, I sold off the rest of my shares. I went into detail in my last investor update about why I was selling out of Starbucks.
Peloton (PTON): After the horrendous earnings call and nosedive this stock took I first had decided I was going to stand pat and remove my stop loss order I had in $55. After doing some reading and analysis of my portfolio I decided to leave it on. I’ve had this in as a way to protect the downside. $55 was the level that if it ever got to I wanted it to sell. Obviously never wanted it to get back to these levels. But it hit there and sold. Since it has tumbled down even lower.
Then this week they had indicated they were going to do an over $1 billion dollar stock offering. This came after they indicated on their earnings call that they didn’t foresee the need to do this. So in a week that changed? Why do this when the stock is this beaten down and at the lows? You do this when the stock is way up.
I think management needs to get things figured out. It hurts not being a shareholder anymore as it's given me one of the best returns I’ve ever had in a stock. I love their product. But their stock is a mess currently and I’m not comfortable being in it at this time. If things turnaround I will reassess.
DraftKings (DKNG): Like Peloton, DraftKings has been one of my favorite companies but their stock has been brutal. As I mentioned above about having a stop loss in for Peloton, I had the same in for DraftKings at $40. I wanted to hold DraftKings but where I bought it and where it had gone too has hit a level where I wanted to sell out of it. I decided not to double down and buy more because the size of this holding was already at the maximum percentage I wanted in my portfolio.
I’ve sold some shares along the way when it was much higher so did ok on this one. Still like the product but it’s still very early for this company.
The reason why I have stop loss orders in is to limit my downside. I set points where I want sales to occur. Maybe I want to lock in gains or sell out to avoid losing more than I want to risk. Remember a 25% loss requires a 34% return to get back to even. A 50% loss requires a 100% return to get back to even.
What I’m Watching
Airbnb (ABNB): The top stock on my watchlist even over Coinbase which I just bought is Airbnb. It kept staring at me in the $160s for the longest time and I just couldn’t pull the trigger. Well I kick myself now. It had a blowout quarter and the stock has taken off and settled back above $200. With international travel starting to open back up and people all over traveling more this is one of the ultimate getting life back to normal and traveling plays.
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Disclaimer: This is not investment advice. You should not treat any opinion expressed as a specific inducement to make a particular purchase, investment or follow a particular strategy, but only as an expression of an opinion.