Here’s the transcript to this week’s Live Q&A chat. Join me next Wednesday at 2pm EST at https://tradingwithcody.com/chat or send me an email with your question at email@example.com.
How everybody! Let’s rock n roll.
Q. Cody, absolutely an incredible video of your friend Dr. Shore explaining the double arm transplant, what cutting edge medical skills are required. Thanks for sharing!
Thanks, I’ll share your comment with him. Dr. Shores is an inspirational person in his own right and the lives he’s changing by helping develop these new medical miracles inspire everybody who learns about it. He told me last night if I remembered when he used to explain to me that the concept of what we call “plastic surgery” today will someday be looked back upon as a crude concept like leeching.
Q. Cody, feet to fire how does FIO fare this afternoon? Is FIO really eating everyone’s lunch or are there other trends that have hurt similar companies and that FIO is not immune to?
A. F2F, I’d guess FIO’s topline shows another huge leap in growth and backlog and that earnings could be much better or worse than expected depending on how much the company’s spending to grow that topline. Remember this is a VC-like investment, so I don’t even want to try to game the earnings reports in the near-term for this one. In five years, we’ll either have made a bunch of money on this one, or we’ll sell it for a loss at some point.
Q. Hey Cody, welcome back! We had a rough week last week and it helped me realize not to put too many eggs in one basket. Hard to do when you “believe” something so much. Anyway, FIO has been hammered on the following report: “STX announced an agreement with Virident to jointly deliver enterprise flash storage solutions. More specifically, STX (which made an investment in Virident) will immediately offer a complete line of PCIe solutions. We view this as an incremental negative for FIO (which reports results Wednesday evening).” This was written yesterday I believe. Does this change your thesis at all on FIO? I am net positive on my position, is it time to sell before the earning and CC tonight, add to the position, or do you recommend holding tight? Thanks!
A. See my answer above about the call for FIO tonight. Every data storage company is going to get into the flash-drive storage at some point, so no surprise that STX is trying to do so.
Q. Cody just purchased FIO and NVDA long. Are you expecting a big upside in both?
A. I do expect that FIO and NVDA will go up and go up big over time or I wouldn’t own them. I’ve been wrong before though. 🙁
Q. Cody, VMW is tanking. What happened?
A. Competition is heating up for the virtualization software market. VMW’s still a huge grower and is still worth $33 billion, so, there’s that.
Q. Hi Cody, Welcome back to the wars. I feel that my mistake over the past weeks was buying the AAPL calls 3-6 months. I got cocky and bought too many calls relative to my common shares. AAPL had gone up so far so fast, that it didn’t make sense for it to continue the rapid ascent. I feel confident in the AAPL commons because I think that Steven Jobs probably left them many new products to work on that will transform our lives. Let all the haters leave the stock and focus on someone else (such as Blackberry) and let AAPL just keep churning out the revenue.
A. I don’t disagree with anything you wrote. And great job on the self-analysis and learning from the process.
Q. Cody, regarding Apple, there are a number of theories floating around: Shift from growth to value, over-owned by large funds. If I read too much into those, it would feel that Apple would never climb out of this hole. However, I think the key is still Apple’s ability to innovate and generate earnings. The others are just noises. What do you think? Should the shift or limited money available to invest in Apple be a concern?
A. I think the retail shareholders and mindless long money managers just got complacent with AAPL and that we’re still shaking the people who bought AAPL in 2012 out and that could take a while longer. The multiple will be supported by the cash, the yield and the giant earnings that will continue for the next few quarters, so I still think it goes higher eventually.
Q. Cody, NVDA is known for PC video chips. at 12.35 is there much upside in chips the market is just completely missing? As for apple earnings what was your take and why the plunge in your opinion?
A. The NVDA investment is a bet that their smartphone/tablet chips, especially the white label idea, catches some traction this year and next. I’d written before the AAPL report that the bulls needed $16 a share in earnings to bust out of the bear, and AAPL didn’t quite get there. No shock that these weak handed AAPL longs puked after the report didn’t “blow ’em away.”
Q. The consensus in AAPL seems to be around $42. How do you get to $60 in earnings….
A. Look at this page for example. Estimates for this year range from $40 to $63 a share for next year..
Thanks Cody. I looked at the link and I realize that I was talking about the year ending 9/13 and you meant 9/14.
Q. Are you still holding April 650 Calls for Apple, you bought them when they were around $14 and now they are at about $0.39. Do you see an upside in the next few week to recover some losses and then dump them.
A. I am still holding those losers as I noted yesterday. It’ll take a miracle to get those profitable before they expire at this point though. I’m probably not going to bother selling them for less than a buck though, just in case the miracle happens, which over the years AAPL’s been a bit miraculous for me, so who knows. Not a good bet though. Mea culpa.
Q. Cody, so is this a right time to buy AAPL calls you think?
A. I thought that last month was a good time to be buying AAPL calls and I’m still choking on them. As noted yesterday, I’ve sold down almost all my call options of any value and am letting my common stock do the work for me for now.
Q. Cody would you consider buying long term calls in addition to common on NVDA?
A. Yes, but I’d be very careful about how much you risk in options. But if NVDA can run to $30, there’s a lot of call options that would be huge home runs from here. Then again, if the stock sits around here and goes to $11 and we decide to exit the trade, there’d be just a tiny loss on the common stock but probably a big capital loss on the calls.
Q. Hi Cody, I’m worried about the connection between QCOM and Apple and Samsung as a big customer. Also, will you consider Samsung in the near term?
A. We added Samsung/EWY as a recommended short position to help hedge the AAPL/QCOM longs.
Q. How about the earning release from QCOM today? Hold it through or not? Thanks.
A. I think there’s a huge backlog for the 28nm chipsets that QCOM’s new builds are rolling out and that QCOM’s hitting on all cylinders. I’m holding and will buy more if it gets hit on the report.
Q. Hi Cody welcome back. Any suggestion about FB especially for those who own common (to protect against a bad ER )? Thanks.
A The easiest way to protect your downside in a common stock investment in front of any given earnings report is to simply buy a few puts slightly below the market price expiring in the next few weeks or so. You’ll cut into your gains if the stock works its way higher with the losses on the puts, but if it helps you sleep at night, there’s nothing wrong with some hedges.
Q. FB earnings?
A. F2F, I think the bears need a pretty ugly print to get FB down tomorrow. I think there’s a lot of tech/momo/growth money out there that wants into FB and if there’s any momentum in tonight’s report, the stock could keep running right towards its old IPO price.
Q. Any research on shorting other paper based companies like the textbook plays?
A. I’ve not revisited the education/textbook short thesis in a few months, so I’ll do so and see if anything pops up as a great short opp.
Q. Hi Cody, just wondering what you did with your in APOL in the money puts? Did you end up taking profits or rolling them forward? Thanks.
A. I sold some of the APOL puts and I let some exercise. I want to buy more APOL puts, but I just haven’t done so, and that’s a shame, as the stock continues to languish and we could have made even more money on this welfare-company short.
Q. Any new thoughts about Blackberry calls 3-6 months?
A. I think you might want to consider both calls and puts on the RIMM/BBRY and see if you can get lucky on the volatility ahead.
Q. Hey Cody, welcome back! I put a straddle on MSFT with Feb. expiration anticipating some kind of movement either way. It’s just sitting still and the time value is eroding away hope for any profit. Do you have any advice?
A. No, no advise on the MSFT volatility or lack thereof. The stock is, I guess, too cheap and too unloved already to take a hit from the loser rollout of Windows 8.
Q. Welcome back Cody. I wonder what you are thinking these days about the 3D printing space. Any thoughts on SSYS, DDD or ONVO?
A. I think we gotta get some exposure in 3D printing asap, but I’m looking more towards revisiting our old reliable money maker friend, ADSK.
Q. Any thoughts on FIRE – Sourcefire?
A. Good question, and a stock I haven’t dug into for a while. I’ll get my research team to revisit FIRE.
Q. TLT down quite a bit last few weeks?
A. I think the Treasury bubble has popped, but I won’t rush into any trades on that thesis until it’s clearer.
Q. How long can the S&P continue going up like this? Should we commit new capital or wait?
A. I think the market’s overbought for the near-term and the path of least resistance is now down. I’m waiting before committing more capital. How long have we been using the “buy panic, sell euphoria” approach to such success? This is certainly closer to euphoria as we near all-time highs in the markets again, than it is any form of panic right now.
Q. Would it be prudent to nibble on SPY puts for March and April strikes?
A. If you’re looking to capture alpha on any downswing and/or you’re looking to hedge your longs, then, yes, I’d look at some spy puts here.
Cody congratulations on your wedding. Thanks for the EWY ( Korea index ) short.
Thanks and you’re welcome, I hope.
Q. Cody, a lot of times on mobile devices, the scroll chat feature on the site defaults to the oldest entry. Then you have to take the time to scroll through a month’s worth of Im’s. Can you get a “Latest” button on there to advance the screen to the latest few comments? Just would be a convenient feature. Thanks.
A. We’re working on a completely new updated redesign for the site and the chat. Stay tuned and thanks for the suggestion!
Okay folks, that’s another episode. Exit stage left.
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