Q. Hi Cody. I’m curious as to the thought process behind buying long common stocks while at the same time shorting the market. If you are buying the stocks to hold for the next few years, and you think the market will be dropping, possibly significantly, that you would simply wait for that drop before buying the common long stocks? When I see your trade notifications with both a short the market/significant pullback ahead message combined with a tranche of long common buying I get confused.
A. Great question. You see, I know that I don’t have a crystal ball and if I were to sell down all of my long-term Revolution Investing ideas whenever I think the markets are ripe for a pullback, I’d certainly at some point end up missing a big move up by trying to navigate the markets so perfectly. Trading is more art than science and that is even more true when trying to time a market top. Over the last nearly 20 years, I’ve learned that combining my long-term approach of buying Revolutionary Companies while shorting welfare queen companies and complementing those long-term gains by adding on dips and selling on spikes can be a very profitable approach to the markets. I’ve also completely sold out of the markets when I got completely bearish, as I did in 2007 when I closed my hedge fund to become a TV anchor. I’m not nearly that bearish right now, I just think the markets are ripe for a pullback and need some panic to make me feel good about getting aggressive on the long side again. Patience and timing and art and science and homework and analysis and hedging and ebbing and flowing…all part of the process.
Ask me anything folks. Let’s learn from each other.
Q. With growing better gov economic data jobs and the like are the analysts too pessimistic on tech? It has lagged so badly. When the market falls tech leads, When the market goes higher, tech lags. Adding to Juniper or the mantra of bigger pullback you have keeping you from adding it or CIEN today?
A. That’s a compelling hypothesis you throw out there — phrased another way, “Are analyst estimates too low for most of the tech sector for 2013?” The main reason I like your hypothesis is because I HAVEN’T HEARD anybody else even ponder the question. I read a ton from the bears about how corporate margins have to contract to some magical historical level but I’ve been writing for a decade about how a shift from selling low margin cars and steel and other commodities to Internet services, smartphones, tablets, apps and software along with the endless Republican/Democrat Regime’s push for more “help the economy through helping big corporations profits” are likely to continue pushing profit margins higher. At least until the financial economy implodes upon itself (once again, as it always does over time) with its fraud, lies, theft and plundering that continues unabated.
Q. Do you think that the market can ignore Apple’s fundamentals forever? As in completely forget about the platform that people love.
A. My subscribers and I bought AAPL originally back in March 2003 when the stock was $7 a share. That’s $7 per share even though the company had $8 per share in net share and was cash-flow positive, slightly profitable and rolling out iTunes and iPod. It took six weeks to go up again. Over the years AAPL, the stock, mostly went up, but also had 35% and even harsher pullbacks, sometimes lasting for months or a year at a time. Ten years later (hey it’s our 10 year anniversary of buying AAPL for the first time, everybody…happy anniversary!) and Apple now has $130 per share in cash on the balance sheet and will generate $50 a share in cash flow this year. Even if you were to pay just for the cash on the balance sheet and the cash flow this year, you’d still end up paying a $180 per share price in the stock. That’s up from $7 a share. I suppose AAPL could trade down to $150 a share, which would be equivalent to where it traded back in 2003. Of course, it would probably be the second greatest opportunity in history to buy AAPL on the cheap if it were to go down that low. The first greatest opportunity in history to buy AAPL on the cheap was indeed in March 2003, at least in my opinion.
Q. Do you have any intel on whether or not an AAPL TV is in the making? I read that Jeffries says not this year, but I don’t know how they would know. I think people are waiting to see what’s next before getting back in to AAPL.
A. I think you’re right that the money won’t come back into AAPL until we see some new products such as the rumored iWatch and iTV. Google’s rolling out shoes, glasses and more. The market wants to see something wild out of AAPL. I’m one of the only Apple analysts I know who hasn’t expected much in the way of an Apple TV besides the little black box AppleTV thing the company currently sells. I do think Apple’s got a lot more innovation and product lines to try out on the public over the next three years.
Q. Cody- If we are waiitng for a new product to get back on the apple bandwagon in terms of some love vs the hatred of 6 months and 40% decline when is this “PRODUCT” to appear holiday season 2013? 2014?
A. I think AAPL will have something new that nobody expects sometime before this year is over. Maybe this summer.
Q. Cody, have you taken any short positions in Samsung yet? You wrote about a variety of ways to accomplish it, but wondered if you have yet.
A. Yes, I’m short the EWY, which is an ETF full of Korean stocks, of which Samsung comprises a huge chunk, as outlined here.
Q. Thanks Cody. Have you added any tranches with the ramp up of the Galaxy IV?
A. I guess you mean in the product and hype ramp up into the Galaxy IV launch, because the stock itself has gone straight down since I first shorted it and I haven’t had much of a chance to add another tranche just yet. I shorted it near the top of this chart in a better to be lucky than good timing sort of way.
Q. Do you give any credence to the report today that FB ad quality is deteriorating and that projections are way too high?
A. What report is that? Here’s something I read about FB ad quality IMPROVING not deteriorating. You have a link?
Q. Hi Cody, here’s the synopsis on FB ad quality downgrade.
A. Sounds like an analyst who downgraded last month trying to find more reasons to justify his “sell” call on FB. I’ll take the other side of that and I’ll bet that in a year from now, we won’t even remember his report.
Q. Hi Cody. Are you trimming any SNDK common or just the options? If not, why?
A. I trimmed just the Sandisk call options today. No real scientific reason why, I just wanted to trim some of my option exposure and these have had a HUGE run since I wrote back in December that I was buying before the break out, as outlined in this post:
I’m also buying some Sandisk April calls with $40 or so strike prices. Just a tranche buy while it’s down and per my write up on flash in the smartphone/tablet world.”
Also, this post:
Sandisk is looking like it could try to break out next.”
Thank you very much.
Q. Is it time to consider selling GOOG? Do you think that GOOG is in the midst of a pump and dump operation by the usual suspects?
A. Back when GOOG was half its current price, I was writing articles putting a $1000 plus price target on the stock. I do think GOOG is getting ahead of itself and is awfully extended for the near-term, but in three years, I think it’ll be higher than the current quote.
Q. Cody is Gold bottoming here?
A. Yes, I think Gold is bottoming here, but I don’t recommend buying any of the ETFs or other paper/computer ways of “investing in gold”. Stick with the physical coins and bars and don’t pay more than 5% over the current quotes you see on TV for a gold ounce when you buy those coins and bars. But you will have to pay some premium and that’s just fine. Don’t pay more than about 5% over the so-called spot price.
Thanks as always for your insights.
Q. Any thoughts on coal or natural gas?
A. Not any good insights for you on either coal or NG here. Sorry.
Q. Love the new site BTW
A. Thanks for the compliments on the new site. It’s been a lot of work to upgrade everything, but I sure am proud of Bill and the rest of my team with the results we’ve gotten. If you guys reading this transcript haven’t visited the new site, come on buy to TradingWithCody.com and check it out. Any questions about logging in or surfing the site, just email us firstname.lastname@example.org.
Okay folks, I got to go get Marilyn Monroe from the my dad’s old vet clinic where I was the kennel boy for 12 years growing up. She got checked up and cleaned up by the world’s greatest veterinarian, my dad! http://RuidosoAnimalClinic.com. You can see my sis on there too. Family is key to life: Ruidoso Animal Clinic Staff