As usual in this part of this cycle, I’m looking to scale into some of my long positions that I’m still slowly building. Obviously my most recent buy, Sony, stands out after taking a hit yesterday as the company announced a big write-off in its smartphone business and a $2 billion loss target this year. And they’re suspending their dividend for the first time since the company came public in 1958.
None of this comes as a surprise to me as I wrote last week when I initiated a my buying on Sony, “They’ve failed as smartphone vendors in the long lost joint venture with Ericsson and ever since.”
I am not surprised by Sony’s warning this week and frankly they give us the chance to start making this bet even lower than we would have otherwise.
I’m not about to say that we’re going to get a 100X return on our money with this SNE common stock like I did with my AAPL common stock from the time I first started buying Apple, but I do recall that AAPL took a 5-10% hit right after I started buying it back at about $1 per share in 2003. The stock was pre-split at $14 a share and it dipped to $13 or so before starting its long, long ascent higher and marking its final bottom right there at $13 or so. I think Sony’s pullback today gives me the chance to finish making this a mid-sized position at a lower price than I otherwise would have.
I think much of the bad fundamentals and certainly the Sony smartphone failure is already baked into the $SNE stock at a $20BB market cap. Their movie and TV show assets are probably worth more than $20BB alone, as Sony Music CEO, Doug Morris, and I had talked about last week.
Remember that Netflix and Amazon and Google and Apple and others are all desperate to get their hands on Hollywood-quality content. The more money these companies generate selling video content, the more upside Sony Pictures has. The ability to pay up for that content as Netflix and Amazon and Google and Apple all compete to stream/download that content to you is a huge and growing catalyst for Sony.
Watch for the Sony ship to righten over the next year or two and if it does, the stock won’t have waited around at below $20.
And as I wrote on Monday, “I am however still scaling into some Sony, making it a mid-sized position for now.” Which is still true, as I continue to slowly build up my new SNE common stock position after this warning hit on Wednesday.