Let’s rock n roll.
Q. Given the fear of P/E contraction, should I sell down some of my high P/E stocks even though I just bought them not long ago? Do I need to sell and buy again after the election? Sorry to ask dumb questions, but I’m still pretty new to all of this.
A. These are not dumb questions that you’re asking. A dumb question would be: “After they make Styrofoam, what do they ship it in?” –Steven Wright To answer your good question, is that it all depends on your own time frame, risk-tolerance, goals, etc. I have indeed sold down some of my own stocks and now a multiple contraction is indeed occurring, but that doesn’t mean that you have to do the same if you would rather just hold on. I could definitely be wrong about a valuation contraction happening in the near-term, so there’s that too. Anyway, my main advice here is about teaching you to fish by telling you this valuable lesson taught to me once in a one-on-one meeting about trading my hedge fund with Jim Cramer: “It doesn’t matter where your stock was or where or when you bought. It matters only where you think it is headed now.”
Q. Hi Cody, Would it be appropriate for a small portion of a portfolio to have some INTC, CSCO and MSFT in lieu of t-bills. Assume have enough current income to live. Approaching retirement say 5 years. Thanks.
A. I’ve mentioned that triumvirate before and I do believe that there’s some sense in those folks looking for yield to put part of that money into those three names while you can get double the rate of Treasuries right now. But I wouldn’t go all in on that. Here’s something my friend Robert Marcin wrote this morning which, while I don’t think it’s a “top marker in dividend stocks” I do think he makes a very important point about the risk of capital loss in equities, even those equities with high yields like MSFT, INTC and CSCO: “October 10, 2012 – 8:59 am I saw a popular financial commentator recommend swapping bank cds for jnj share for income purposes. dangerous game. 5 years of yield can be lost in bad month for stocks. sign of the top for yield plays?” – Robert Marcin
Q. Good Afternoon Cody. I wanted to thank you for developing my stock skills by enlightening me throughout the year with your knowledge. I know you have touched upon Cy numerous times in the past and stated that you weren’t a big fan of them due to lack of fundamentals. I have been watching Cy where I have observed some major steps that they are taken to develop and expand there company in a positive manor. Today Cy is down to $10 or so, today I believe they are going through the transition of of completion offer for shards of chipmaker Ramtron International Corp. Cy is also going through another transaction with Tokyo electron device whereby TED will become a distribution partner of Cypress. It seems to me that Cy is starting to get there ducks in a row to become a more stable and productive company. What are your thoughts on Cy now since the last time we talked about them which was earlier in the year? At one point last year you stated that they could be the next apple?
A. Thanks for the kind words and I’m thrilled that you’re learning to trade and invest more successfully through our service. I think it was a few years ago when I said that CY could be the next Apple, but I was wrong. We made some good money at first on that trade and took some profits and then ended up losing some of those profits by the time I sold it and moved on, which I believe was in the mid-teens. With the stock down 35% since then or so and near or below $10, I think CY could be a good trade. I don’t think the management executes well enough for me to want to own it long-term/forever.
Q. Tech getting killed- Avnet saying slowing demand as a result of global decline and potential icould proliferation. Is it apple vs the world and same for CRM and FIO like companies?
A. Interesting phrase-ology you used: “Is it apple vs the world and same for CRM and FIO like companies?” Yes, in many ways it is. There is no doubt that Europe will be a drag on demand for the next quarter or two or much longer perhaps, but pure-growth companies will likely continue to outperform if the market can continue to stay in bull market mode overall and stock to earnings multiples expand.
Q. For a little while GOOG and AAPL were the same price. Now GOOG is 100 points higher than AAPL. Should I switch out of some GOOG and into AAPL? This seems like a gift here to be able to buy AAPL at 10 percent off its high.
A. I’ve sold down my GOOG calls for some nice profits recently, but the stock has kept running still. I like both GOOG and AAPL enough that I keep relatively large net long positions in them most of the time. Tough to make a Sophie’s Choice on the pair.
Q. Cody – I read your note on apple. Do you think we’ll get a rise over the next two weeks, looking forward to the ipad mini? If so, it seems like a good time to jump in on calls? Love the DDD trade. seems like we’re in a consolidation similar to May/June this year. Are you buying calls in the near term, or longer out?
A. I’m not sure how Apple will trade the next two weeks, that’s not the trade I’m making. I do think starting to scale into some calls dated out at least six or nine months in Apple is probably a good trade and I’ve been doing that, as you know. I’m worried about the potential for a stock price to earnings multiple contraction happening to most high growth stocks, including DDD, for the very near-term, as the path of least resistance seems lower for now and the market momentum has faded, so I’m not adding to it right now. Would look out as far as possible on the calls on DDD when I do start buying them though.
Q. Any thoughts on FIO into it’s next earnings report?
A. Again, I’m worried about an overall market stock to earnings multiple/valuation contraction and especially for high-growth stocks like FIO. As for the quarter, I do expect that with both Apple and Facebook, two of FIO’s biggest customers, spending like gangbusters on technology and infrastructure, that FIO’s going to continue to deliver big topline growth. Whether the market likes that or hates that is the question I’m getting at.
Q. Hi Cody – any thoughts on CRUS – an appleholic friend of mine told me to buy it in the mid 20s – which i did not do.. Not sure if you have commented on this one before.
A. I’ve not written about CRUS in a long while and I’m not on top of it right now, but here’s what I’ve written about it in the past.
Q. It is being said that AMZN is down today over fear of Walmart and its plan to offer same day deliveries. I don’t see AMZN as a competitor of Walmart due to higher pricing with Amazon and a different target population. Please offer your take on this issue.
A. I do think Wal-Mart’s delivery service is a threat to Amazon’s overall retail business if Wal-Mart can really pull it off. That said, I think Amazon’s got so many other more important businesses including streaming video and tablets and someday smartphones, that I’d be a buyer of Amazon if it drops much lower.
Q. Cody any opinion on FIRE?
A. Haven’t looked at FIRE in a long while, but search the site and I’ve analyzed it too.
Q. Cody what are your current views on JNPR? (thinking about buying some Apr 2013 $20 calls).
A. I like Juniper here if for no other reason than it is really hard to like Juniper here. I’m not ready to start buying again yet, but JNPR and those types or longer-dated calls are probably on my buy list if/when I do.
Q. Cody, as I work toward my portfolio looking more like yours, I’m holding some Ebay stock because of Paypal. Sell or hold?
A. I like Ebay and am mad at myself for not owning it when they were selling off Skype and streamlining and focusing on making Paypal even more universal. I don’t know about its valuation, but longer-term, they’re looking sweet.
Q. Cody what are your thoughts on MRVL trading at $8.87 currently?
A. Wow, I hadn’t seen it that it’d fallen that far. They’ve got nearly $4 in net cash per share. The problem is their main customers, the hard drive makers like Seagate, are in inventory overbuilt mode. That will be a buy here at some point and probably sooner rather than later. I am going to work on MRVL this weekend.
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Q. Are you going to send out an e-mail this quarter with the dates all the stocks in your portfolio report?
A. Yes, that will be sent out on Friday.
Okay folks, that’s a wrap. I need to eat some lunch. Got some ground beef, green chile, bean, potato, cheddar burritoes with my name on them in the fridge. Please do try out the new game by going to ThatMattered.com and start playing the new game by asking for a password. We’ve got you set up with complimentary access to play the game by using your TradingWithCody.com username and/or your email address. To get a password to login to the site click here and put in your email address or TradingWithCody.com username. And let me know what you think of it!