Let’s rock. What’s on your folks’ minds?
Q. Cody, could you elaborate on the That mattered game?
A. I put hundreds of hours into designing, building and writing the game and the site. We’ve had hundreds of people play it and one person even ended up turning the inheritance you start out with into more than $200 million. Incredible. We’re about to publish a paperback book version of the game and we really need some more testimonials, so please try out the game and send us some comments that we can use! Thanks everybody!
Q. This ER season has a lot of Revenue misses and poor outlooks. Feels like things are getting better but this does not jive, thoughts?
A. The real question for stock investors and traders is whether next year’s earnings for the S&P 500 will be another set of record profits. Despite how badly the economy has been for Main Street, we’ve been right for the last four years that the big corporations would report record profits. And the market has gone up big time. Europe’s definitely having a drag on a lot most big companies right now, but there will be a lot of stimulus and new corporate welfare and new targeted tax tricks and endless 0% interest rates for big business and banks for at least a couple more years.
Q. I wanted to ask your opinion on how you can enjoy what we have gained by investing. For example, actually I’m growing my portfolio, but when my portfolio grows to a certain amount I planned to buy dividend stocks. But I’m interested in your opinion on how you can enjoy your investment.
A. Unfortunately, in this supposed “emergency” times even as the banks earn record profits, the Fed and the Republican/Democrat Regime and the banks have colluded to rob you of the ability to just sit back and collect interest on your hard-earned capital, whether grown from investments or hard work or both. 0% interest rates are forcing people like you who want to relax to continue to invest in risky assets like dividend stocks instead of, say, 5% yielding Treasuries or something natural like that. My best advice is to diversify into a pool of decent yielding dividend stocks and to find local investment opportunities like buying some cash-yielding, low-maintenance asset out of bankruptcy when the time is right.
Q. Cody, I need to buy something in my IRA—10 Year Investment. What do you recommend?
A. Take the five highest-rated stocks from the latest positions post I’ll send out tomorrow and start scaling into them.
Q. Cody, this quote is from a scary report on DDD. “Reported last twelve month organic revenue growth of 19.3% is overstated by an estimated ~100% since the Company is including a portion of its revenue growth from recently completed acquisitions as organic revenue growth. We believe last twelve month organic revenue growth is no more than 9.6%.” Is this something to be really worried about? What is your take on this?
A. I’m worried about a lot of stuff with DDD, mostly its valuation and what it spends its money investing in for the future, but the organic growth of 10% vs 20% isn’t one of them. DDD’s a lot like FIO in that it’s most likely to either be a 10x homerun or a 50% loss someday.
Q. What’s your latest view on DDD ER due tomorrow morning?
A. Like FIO, DDD is just too wild to try to game its near-term earnings reports. Sorry. Here’s hoping it’s good!
Q. I’d like to know if you have any insight into the SeekingAlpha service in general. I’ve often seen two posts very near each other (timewise) on a stock, one bullish and one bearish. What’s the deal?
A. Short story first – When they launched SeekingAlpha, I got an email from the founder and editor-in-chief/CEO who wanted me to contribute. I sent in an article and he had all kinds of problems with it and I just didn’t have the time or need to deal with it, so I never looked back. A few years later I was hosting my own TV show on Fox and the tables sure had turned. Anyway, they soon after launch started publishing most anybody who they can get to write for them and I get very little value out of much of any of it. There are some good contributors of course at SeekingAlpha, and some of them are my friends even, but I don’t read the site very often.
Q. It’s been asked on the message board, but thoughts on AAPL ER? I’m sitting on cash, which is never a bad thing, just don’t want it to be idle unnecessarily.
A. Feet to fire, I think the risk/reward is favorable for the bulls heading into this quarterly report, what with the stock down nearly $100 from its recent highs and with the fear from the bulls, myself included, heading into the report after the wounds from the 10% post-earnings drop 3 months ago…well, I’d rather be long than short AAPL into the report. But I’m obviously speaking my book. Gulp.
Q. Do the AT&T and Verizon iPhone numbers provide us with any meaningful clues about the AAPL earnings release tomorrow?
A. Yes, but the iPhone sales aren’t necessarily what’s going to drive the stock after the earnings report. Mac sales and iPad sales are just as important heading into this one, IMHO. Plus, there’s global iPhone sales and Vz and T would only account for part of domestic sales.
Q. Cody, I have read your recent post on mobile networks and the backhaul process and growth. There was a great article on AMT, SBAC and CAVM. Barron’s was really bullish two weeks ago on all three. I think CAVM could be looked it for the RI portfolio. Thoughts on this or even AMT and SBAC?
A. I was short AMT at $5 a share back in 2002 as part of a hedge to some other telecom longs, and I covered in pain at $6 or $7 as I recall. I’ve never been able to get over that emotion on AMT and so I just don’t trade it because I don’t want to be emotional in my trading. The tower stocks have been great investments and are still poised for a lot of growth. I’ll look at CAVM afresh.
Q. Cody: You mentioned Windstream in your deepdive into telecom, and that’s one I’ve been watching closely. While it may not be the mover and shaker that some of the stocks in the portfolio are, doesn’t the roughly 10% dividend make it attractive as an insular holding to some of our more “ahem” volatile stocks like DDD for example? Just wondering if there is a philosophical reason to not put a stock like Windstream in with these qualities, and the obvious relation to the tech sector.
A. Short answer: $8 billion in long-term debt. $200 million in cash. Not sure that 10% yield will actually be paid out.
Gotcha. I thought you’d say that, and you’re probably right.
Q. You absolutely nailed AONE – it has tumbled down again today. Thanks for that it really gave the portfolio a boost! 🙂
A. Man, we did call that AONE would go bankrupt years ago and we did buy it at 5-6 cents and sell it at 11 cents and then 18 cents. Catching a lot of top and a lot of bottom on that. One for the record books, really. So remember that we probably won’t get it that easy next time, ok?
Q. I still like the long-term thesis on GLW, but it just keeps disappointing….thoughts?
A. Gloworm just can’t get any sustainable pricing power in their various product lines at the same time. When one sector like smartphone demand takes off, another like TVs collapses. I took GLW off my screens a few months ago and I’ll put it back on, but I don’t expect to buy it any time soon. BRCM’s a better play with better customers, IMHO.
Q. Hi Cody, I know you were looking into MRVL again, any thoughts?
A. I’ve been working on MRVL since last week after getting an email asking about it from one of the very best value investors I know, Vitaliy Katsenelson. Here’s what we got so far: OK, the company has $3.80 in cash per share and is trading at just 3.8x run-rate earnings, BUT, revenue declining versus last year and they reduced guidance for the current quarter by about $50m. PC demand is slow. Also RIMM is a big customer. Earnings estimates may come down, making that multiple a little higher, but virtually no debt. Kind of iffy, but probably a decent longer-term play…(see detail in the attached spreadsheet). “The continued slowdown in the global economy during the third quarter is resulting in a weaker PC market than previously anticipated and thus lower demand from our storage HD customers. Our SSD, networking, and mobile product revenues are tracking to be in line with prior expectations,” said Dr. Sehat Sutardja, Marvell’s Chairman and Chief Executive Officer. “In addition to the continued weak PC demand patterns, visibility in our other end markets remains low as we head into a seasonally softer fourth quarter.” All that said, I think it’s a buy for long-term investors.
All rightie folks, that’s another wrap. See you next week on this same Bat Channel at the same Bat Time!