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Trade Alert – Monsters and fruit

November 8, 2012 by Cody Willard Leave a Comment

You’ve probably heard the old saying from Keynes that “The market can stay irrational longer than you can stay solvent.” Here’s a snapshot of how irrational things probably are right now and why we need to continue scaling into our highest-rated stocks like Apple.

Monster Drinks reported a horrific quarter last night, missing the topline estimates by nearly $40 million on a $580 million estimate and earnings came in even worse. Moreover, here’s the set up ahead for investors:

In August, New York state Attorney General Eric Schneiderman issued subpoenas to Monster Beverage and other energy-drink makers as part of the state’s investigation of the industry. U.S. Senators Dick Durbin and Richard Blumenthal have asked the FDA to take another look at the effect that caffeine and other ingredients in energy drinks have on children and adolescents. They also asked the FDA to look into the interactions of caffeine and other energy drink additives and evaluate the safety of caffeine consumption by teenagers.

In October, Monster Beverage was sued by the parents of a teenager who died after drinking two 24-ounce energy drinks within a 24-hour period. The FDA confirmed that it is investigating reports dating back to 2004 about people who had adverse reactions to the drink. The label on Monster Beverage’s drinks state that the drinks are not recommended for children and people who are sensitive to caffeine.

Which stock has a higher P/E: MNST or the $5.70 stock I was talking about with AAPL yesterday, which dominates the fastest growing and largest end market in the history of the planet.

Apple’s trading at 7x next year’s earnings (ex-cash) and MNST is trading at 20x next year’s earnings. Doesn’t mean that MNST will crash or that AAPL will go up tomorrow though.

Easy does it. There’s more panic out there today and I’m scaling into a little bit more long exposure, buying some FIO common and even a little BIDU common.

 

 

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Trimming Roku, Tough To Buy SpaceX, Amazon Lagging, Etc
Trade Alert: Taking some profits on the SPY calls
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Filed Under: Trade Alert

Disclosure: At the time of publication, the firm in which Willard is a partner and/or Mr. Willard had positions in some of the stocks mentioned above although positions can change at any time and without notice.

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This does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or cryptocurrency or token any other product or service by Cody Willard or any other third party. Furthermore, nothing in this is intended to provide tax, legal, or investment advice and nothing in this should be construed as a recommendation to buy, sell, or hold any investment or security or cryptocurrency or token or to engage in any investment strategy or transaction. You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your business advisor, attorney, or tax and accounting advisor regarding your specific business, legal or tax situation.

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