Here’s the transcript from this week’s Live Q&A Chat.
Q. What is your opinion for the market near term trend? Do you see a correction coming? Thanks.
A. Feet to fire, I think the path of least resistance for the broader stock market is…HIGHER. From a sentiment perspective, most professionals and traders are bearish and skeptical of these recent new highs. We know the fundamental and political and monetary policies are also still in full out Bubble Blowing Bull Market mode. So I think the risk is to the upside near-term, not downside, so to speak. 🙂
Q. There was an article in the wsj this am about the fact that the multiple core approach to designing cpus is not the hoped for solution to the demise of Moore’s law. The conjecture was that fpga’s are the way to go, so we should invest in altera. Too speculative? Note that there has been speculation about Intel buying altera because it realizes that there might be a problem and is trying to buy its way out of the problem, i.e. buy altera. Altera is a hedge on the future.. If the future is fpga’s then they won really big. If not, then their architecture for servers is fine. They screwed up by not getting into the mobile chip business.
A. Wow, big question. CPU vs FPGA. Let’s define terms: CPU, most people know is – A central processing unit (CPU) is the electronic circuitry within a computer that carries out the instructions of a computer program by performing the basic arithmetic, logical, control and input/output (I/O) operations specified by the instructions. FPGA – A field-programmable gate array (FPGA) is an integrated circuit designed to be configured by a customer or a designer after manufacturing – hence “field-programmable”. (Learn more here:http://en.wikipedia.org/wiki/F…).
Cont’d: It’s a great question whether the CPU, a highly-powerful, all-purpose brain for the future devices has a future vs a more specialized brain. Maybe we should think of the Computer/Internet/Connected tasks in the same way we think of human labor. We might want to go back to Classic Greek Economic Theory here. Plato and Adam Smith and others have taught us that “The specialization and concentration of the workers on their single subtasks often leads to greater skill and greater productivity on their particular subtasks than would be achieved by the same number of workers each carrying out the original broad task.”http://en.wikipedia.org/wiki/D… So, now that I’m using this line of parallel computer-to-human analysis here, I’m wondering why we own Intel, which is not specializing in building specialized chips. Did all that make sense?
Q. On CPU vs. FRGA I think we need to factor in the variable of power consumption and potential for greater processing power at lower power consumption since battery technology is the limiter for mobile computing.
A. Lower power consumption is probably the equivalent to low wages in our Computer Works to Human Labor analogy and an important one to keep in mind.
Q. What do you think health care sector?
A. I don’t like how the entire health care sector is a for-profit machine that feeds off taxpayer funds and is controlled by lobbyists and political power. I think there will be a serious reckoning over the profit margins that the hospitals, insurance companies, drug companies, biotech companies and large health-care conglomerates are making these days. Private health care or public health care or subsidized private health care that’s sort of paid for by taxpayers unless a private company or a private citizen has paid an insurance company that’s backed by….well, you get my point, if I can’t make a self-sustaining model out of the industry, I don’t think it has a long-term viable future. And ultimately, I think we all know that the entire Republican/Democrat Regime’s health care system is unsustainable long-term.
Q. What’s your stance on the idea of transports being weak in the economy but a digital rift is being created as more digital data is being consumed and less physical items are being bought as the next generation Gen Y spends less on stuff and more time and money in a digital way?
A. How much of this year’s $15 trillion or so economic activity stems from apps, smartphones, Internet, databases, software, chipsets, tablets, spreadsheets, emails, and so on vs. producing, shipping and consuming larger physical goods? Whatever that % is, for the US and other developed economies, it’s only going to get larger and transports/industrial will only get smaller in the next few years at least.
Q. Will the massive security issues revolving around drones make this market grow slowly vs the HUGE market we can all envision drones can help and work in?
A. Yea, drones privacy concerns, safety concerns and other issues are slowing down its mainstream adoption, but that will accelerate again in a few years as it gets sorted out.
Q. Hi, why is $TWTR acting so poorly?
A. $TWTR‘s management has hurt their own credibility with the way they’ve managed earnings and revenue growth expectations. Wall Street investors and analysts were expecting to see TWTR raise the bar in the last earnings call, not lower it like they did. As a believer in the Twitter platform and it’s long-term future, I don’t care much whether the company is going to grow revenues 50% or 60% in the next year. I care that it’s growing 50% or so every year for the next few years and that still looks very do-able to me.
Q. Regarding $TWTR. So the basic question is: do you have confidence in twtr’s management to be able to monetize twtr or are they not up to the task?
A. If I didn’t think TWTR’s management were up to the task, I’d sell the stock in a heartbeat. I talk about this here: http://blogs.marketwatch.com/c…
Q. After seeing other social media stocks and what they reported like $LNKD &$TWTR do you value $FB even more after their earnings?
A. Nothing changed in my $FB analysis after seeing its report last quarter. The growth, the vision, the execution, the managing of expectations at $FB are brilliant and have been since the day the came public.
Q. How do you feel about Googl around 550 as a place to start a position for longer term?
A. I like $GOOG a lot anywhere in the $500s if you’re looking out over the next five to ten years for your time horizon. I like it below $500 even more. 😉
Q. What do you think about AMBA into earnings on June 2nd? considering its recent run up to 85 handle into earnings?
A. I’d consider trimming some $AMBA if you haven’t yet. That said, though it’s not my largest position, it’s a Top 3 or Top 4 Largest position and getting larger as the stock price climbs. Obviously, there could easily be $10 downside if the earnings report on June 2 is anything but stellar, and the stock would simply be back to where it was this time last week and would still be up nearly 3x where we bought it.
Q. Any thoughts on $AMBA? Are it’s earnings this good? Shorts covering? None of the above?
A. AMBA’s earnings should be great. Good enough to keep the stock from dropping a little bit after a 300% move straight up? Not so sure. 🙂
Q. QCOM made a big announcement last week re their push into the internet of things (wearables, automotive, home,etc). would that focus make you now consider them a buy since they’ve been down lately ?
A. I think $QCOM’s got more risk to the downside as their core smartphone/tablet businesses are struggling and competition heating up for the company.
Q. Cody – I have been an Apple owner ever since I bought it in 2007 and plan to hold it for many more years. I assumed when Apple did their 7/1 stock split that they would probably be added to the DOW index. That has happened but it has left me with a question that I felt better to ask you about. I assume Apple will eventually get above 200.00 in the next few years, maybe even 250 if Carl Ichan is correct. Being that the DOW is weighted by price would Apple need to do another stock split or would the DOW still support it at those prices? At 200.00 I believe it would be the heaviest weighted DOW stock in history. IBM at one point was 6% or so of the index but Apple would eclipse that. Anyway, I was just wondering how that would work as I had no idea.
A. I doubt the DJIA folks would kick $AAPL out for not doing a split. If it gets to $200and it accounts for 5% or more of the DJIA index…well, so what? Why not? Apple would be the first trillion dollar company at that point and it should be a big weighting in the nation’s “Industrial Average”, no?
Q. Do you have any confidence in IBM now?
A. I’m liking $IBM more right now than I have in years. Of course, I was short IBM for the last few years, so me saying I like it “more” is not really a high bar to get over. I do think it’s probably time for me to step back and see if there’s any potential major upside to IBM’s fundamentals in the next few years. Not sure it’s got much downside from current levels, but not sure it’s got much upside either.
Q. I thought you mentioned you are starting to get interested in IBM for its consulting practice…maybe I dreamed it but wouldn’t Accenture (ACN) be a better pure play and perhaps ahead of where IBM is in monetizing their cloud/content delivery consulting expertise? Chart looks a lot better.
A. Yes, I was looking at ACN just the other day. The chart for ACN is a lot better than IBM’s, but remember how bad SNE’s chart looked when we first bought it? Will be interesting to look back at this ACN vs IBM chart in five years. I think IBM will outperform ACN over that time frame, simply as a matter of valuations.
Q. Since content is king these days, hence investments in SNE and ICON. Are there other content providers you are thinking of.. How about DISCA (discovery), SNI (Sony) maybe even LF (Leapfrog)?
A. I like Discovery $DISCA and Scripps $SNI. I think Leap Frog $LF is an interesting idea on this content-is-king concept, but their products and content sure seem pretty worthless to this new parent. DISCA or SNI at a big discount like we were able to get on $SNEand $ICON might pique my interest.
Q. Anything change in your thinking re McDonald’s? Do we wait for the next ER and/or lame attempt to change ops or their menu for the market’s pessimism to catch up with yours?
A. No change and yes, I think we might have to ” wait for the next ER and/or lame attempt to change ops or their menu for the market’s pessimism to catch up with yours?”
Q. Still re Mickey D, are you confident enough of it’s weakening that you’d recommend another short tranche at this point?
A. No, not doing another tranche of shorting $MCD yet. Might in a few more points tho. Patience for now.
