All right folks, let’s rock!
First things first. Man, there is NOTHING as tasty as a great Mexican food dish with New Mexico Green Chile as the core ingredient. Linda, my mother-in-law made the most delicious Green Chile Chicken Enchiladas last night and I’m having it again for lunch. Read this article from the LA Times for more info.
Q. SPY, QQQ , or XLF. How would you rate them 1,2,3 in terms of future growth . Financials better over tech or buy the SPY index. Any thoughts on healthcare. Looking into 2014 Obamacare, how do we place ourselves to capture that growth? Are Tenet and HCA good buys looking 2-3 years down the road?
A. Great questions! I’d say #1 is QQQ, #2 is SPY, and #3 is XLF. I do think Robomneycare is going to be a HUGE free-for-all of profiteering on taxpayer largesse by all the biggest health-care companies for the next few years as Robomneycare floods their gates with coerced demand from every citizen. I probably need to buy a little of a health care ETF that has the most exposure to the largest health care industry companies. That ain’t capitalism, and it ain’t freedom and it’s ain’t fair, but I guess we gotta do what we gotta do as investors and traders in this Republican/Democrat Nightmare.
Q. Any thoughts on gold, GLD, or GDX? Worth buying for this year or not since fed is continuing with QE?
A. I’m looking at writing a big analysis on why it’s time once again to start buying physical gold/coins and shorting the gold paper ETFs like GLD and GDX. Next week I should be done.
Q. Keep staying bullish and buy equal protection? Would this be the way to go? Its a lost bull.
A. Nothing wrong with that strategy at all right now, given the set up. To be sure though, if you hedge all your longs with puts for protection, you’ll cut into future gains. But if it helps you sleep at night, nothing wrong at all with getting more hedged/protected now at this juncture.
Q. Cody, how big of a pullback in market are you expecting?
A. I don’t know yet. I’m not even all that confident about said pullback, as much as I think the path of least resistance is probably lower/sideways for the near-term. I’m not a Technical Analyst fan, but you guys know I read EVERYTHING I can get my hands on, so click here for a good write up about the current set up from a technical analyst’s standpoint. The author makes some great points that echo my own about TA being simply a tool that tells you something about the current psychology of a set up more than actually giving you clues about the direction of the next move.
Q. Hi Cody, I have been a subscriber for a year now and really like your commentary and analysis. I am managing about $50K. After analyzing my portfolio, I see that I made money on the common portion of the portfolio but lost in the options. Luckily, from my past mistakes, I have learnt not to bet more than what you can afford to lose in options, and had less than 30% of the portfolio in options (even when options part was showing profit). Almost all these losses occurred during the last 3-4 months as AAPL and FIO unfolded. I believe I would have fared better if I had more insight into what percentage of capital you allocate to your options. So, I might have over-allocated money in AAPL calls but considering you had rated it 9, it didn’t seem wrong at the time. As you know, the margin of error when trading options is very small, if at all there is one. Now, the asset allocation that you have mentioned below for NVDA calls is precisely what would have been very helpful in mimicking the returns that you are getting in your portfolio. In absence of such information along with future options trades, I don’t see how my portfolio can mirror your returns. I would really appreciate if you can comment on this. Thanks!
A: Great point and thanks for the insights and feedback. I’m always striving to make this a better product and to make my subscribers better investors and traders and I’ll make sure I give more overview of portfolio/option/allocation concepts in future posts.
Q. Thanks for the great service. I appreciate your message and reasons for selling FIO. Maybe it is the right time to sell and I have sold the remainder of my FIO common, however I
am keeping hold of some calls just in case the price rockets suddenly and I will tell you why I think it might – I am not usually a conspiracy theorist, however if there was an impending take over from a cash rich AAPL or FB (or another) all the recent signs – from the type of guidance and the hesitancy in the management position to the story about unpredictable demand, hmmm not sure I buy it! Hypothetically, let’s imagine that the demand really is there, why might the orders be delayed and why might the CEO want to give a down beat commentary such as the one given? Why might at least one or two of your major customers ‘hold back’ on their orders for a few months? Yes there are several possible reasons, BUT I think there is a 40% probability that it is because – the FIO management have been in talks to sell FIO to one of their major customers (i.e. FB or more likely AAPL). A poor ER and poor guidance will keep the share price down, how much would that save a potential buyer??? There has been plenty of buy out talk in the past and now there is none – another contrarian indicator perhaps? Hypothetically, I wonder what would a proposed AAPL buyout do to the share price? I would love to know your take on this, I am not saying 100% this is what will happen (only 40% ish) that is why I am only continuing to hold on to some of my FIO calls dated June and Sept with $21 strike price.
A. Thanks for the kind words and interesting analysis on FIO. I don’t see FB or AAPL as playing M&A strategies in their budget planning for tech spending, and I also don’t think FB or AAPL is likely to buy FIO as much as say, Seagate, EMC, NTAP, Oracle or somebody who focuses more on storage/enterprise/servers.
Q. Are you worried that there are so many phones in every size that competes with IPhone 5, and so many tablets that competes with IPads? Can Apple’s ecosystem stay ahead of the competition?
A. Yes, I’m very worried about that and I’ve written about that and spoken about other concerns for AAPL shareholders repeatedly when the stock was at its highs last year. I still think that the next couple years are likely headed higher in earnings, revenues and stock price for Apple though.
Q. Cody, what’s your thoughts on FB’s earnings? Does FB’s current price justify it’s growth? Are you planning to add more common?
A. Here’s what I wrote about FB’s earnings last week – “Facebook reported another quarter of strong growth with top and bottom line both showing expansion. Mobile ads were a “bit light” according to most of the sellsider’s models, but those same estimates had been moving upward all quarter, so that makes some sense. Overall, nothing new in the report and this one looks like, as I said yesterday, there’s a lot of tech/momentum/growth money out there wanting into Facebook.” Click here to read. I think FB’s going higher and it’s my largest notional position right now and I might add to it if and when the markets get panicky/crash next time.
Q. Any updates on BIDU since their earnings miss?
A. Nothing new really with BIDU. It’s a long-term bet on their continued search dominance/China’s growth, and hopefully they create their own eco-system ala Google or Amazon. The earnings weren’t shockingly bad or good and I’d say steady as she goes for now.
Q. Any opinion on NFLX?
A. I’m so ticked off at myself for not having caught part of this huge pop in NFLX, even after that report. The company’s management is just so wishy-washy that I’ve been gun shy about exposing my hard-earned capital to their execution. Feet to fire, NFLX remains a buy here and is headed back towards its old highs in the next 12 months. Like I said though, I don’t have the confidence in the management there to actually bet on that.
Q. I initiated a short position in IBM at $204 and am looking for shorter term trades now. What are your expectations on IBM?
A. I’m also short IBM from about that level and I am looking at adding to that short position in coming days and weeks as I think IBM is headed back down over the next few months or year or so.
Q. Good afternoon, what kind of time frame are you looking for on possibly adding a different clean energy stock in addition to FF? Are we waiting for a catalyst before getting into a solar, wind or another bio fuel biomass company?
A. I’m probably going to nibble on some more FF common in the next couple days or weeks. Time frame is two to five years. And no, I’m not waiting for any particular catalyst to buy another alternative energy stock, just haven’t done it yet. Stay tuned though, I’m likely to add another in the next few weeks also.
Q. Whats your thoughts on FF in regards to where it can go price wise? I sold some recently as the chart looks very extended at the same time as it seems to want to breakout and go higher.
A. Maybe $15-$18 this year and maybe up to $40 in five years for FF, though I don’t like to give price targets because they can confuse us on our overall portfolio management strategies.
Q. Hi Cody, I’m learning how to handle this feature. I would like to know whether you have an opinion on JCP as a potential put. This company is constantly changing its mission and I feel they are headed for the same conclusion as I Magnin, J Magnin, and other once famous retailers who started messing with their mission statement and lost focus with their customer base. Is there any reason to believe that JCP will be different?
A. No, I don’t think there’s any reason to be bullish on JCP now or pretty much ever unless you could buy its assets out of bankruptcy someday or something. I don’t know about puts because it could take years for JCP’s demise to truly play out, but if you can handle the idea of being short the stock even at a loss for a while until it plays out as you and I both expect it too, then there’s probably profits in that short down the road at some point.
Thanks for your insight on JCP. The only thing that keeps JCP going is that they own a good deal of real estate which like sears and Kmart allow them to last longer then they should.
A. Yes, you got it. That and the fact that the Fed is so damned set on keeping every company liquid at below market interest rates til the roof collapses in on the whole shibang. All or nothing, I guess.
Okay folks, thanks! I’m gonna go get seconds of those GCCE’s from Linda. See you next week.