Cody Kiss & Tell: TradingWithCody Apple, Pandora, Silver and much more. July 15th, 2015.
Let’s do this. Ask me anything for the next hour. I’m doing this week’s Live Q&A Chat from the NICU at UNM Children’s Hospital so I can be near my daughter, Amaris, who is doing well after Monday’s surgeries.
The newest TradingWithCody app with some updates and bug fixes will be available at the iTunes store in the next day or two. Here’s the email I just received from Apple about it a few minutes ago: “Dear Cody Willard, The status for the following app has changed to In Review. App Name: Trading with Cody App Version Number: 1.01 App SKU: twc Regards, The App Store team”
Q: Is there any reason you can see why $P dropped quickly today, almost a dollar?
A: I was trying to find news about it myself this morning when I saw Pandora was down 5% early this morning. Some analyst from OTR Global, which I’ve never heard of, was sort of negative on the company’s growth initiatives, but I don’t think that is what drove the sell-off today. I did publish a Cody Underground Podcast this morninghttps://soundcloud.com/cody-wi… in which both Bob Lefsetz and I are quite bearish about Pandora’s entire business model and I talk about how I’m short the stock, but I don’t think that was it either. Frankly, my theory would be that, as you and discussed in a different discussion here in the Trading With Cody Chat room yesterday (included below), that there was a big seller, sloppy exit. Traders jump on the high volume drop to new 52-week lows and the sell-off feeds on itself. At any rate, I still think the stock is headed to single digits.
Q: What do you think the market in short term trend? What is the appropriate cash position at the current market?
A: I don’t ever advise people about their own individual “appropriate amount of cash position” without first doing a full Deep Dive analysis with them. PS. If you’re interested in me doing a Deep Dive, please fill out this questionnaire to get started: https://goo.gl/DZdgYk As for the market’s short-term trend, I think the path of least resistance is higher and that we could see all-time highs in the major indices before the end of the summer. Not something I’m necessarily trying to game with trades though, though I had been scaling into more long exposure while the markets were down big on Greece/China news.
Q: Yesterday someone asked: Just out of curiosity, how big of a trade does it take to move $AAPL a penny in either direction?
A: My thought was that $AAPL is such a big ship, it must take a lot of volume to move the needle.
The answer of how much volume it takes to move $AAPL isn’t straight forward. There could be a dearth of sellers and then any bids would move the stock up, even 100 shares. On the other hand, at times there could be a flood of both sellers and buyers and then the stock trades a ton of shares, but doesn’t hardly budge. The could be one huge seller showing up one day looking to unload 100,000 shares so he can buy a yacht and that would probably hit the $AAPL share price pretty badly if the selling was sloppy.
Q: Hi Cody. May not be your area of expertise, but can you share your take on Natural Gas companies over the next 18 months?
A: You probably recall how bearish I was on energy/oil/natural gas back last year in 2014 before it crashed from quotes like: “Oil and its collapse could be another spot of crashes as the billions invested in shale recovery could bring on an oversupply of energy creating a vicious cycle downward. If oil falls into the $60s, or especially in the $50s, there will be a lot of pain in east Texas and other shale boom areas. Will that pain spread? The oil/energy/shale bubble (if it turns out we are indeed living in one right now) isn’t the magnitude of the real-estate bubble, which no sector of the economy could sustain its popping, but it could turn out a lot like the dot-com/tech bubble when it popped.” https://tradingwithcody.com/201… Well, now that energy/oil/natural gas have indeed crashed, I’m less bearish on them. But as I’ve been saying all this year, why try to time the bottom in an industry that’s cyclical and facing revolutionary competition from solar/renewables too. I keep saying it will take at least a few years for energy/oil/natural gas to rebound if they do at all from these levels. Too late to short it, too early to buy it. Stick with Revolution Investments that are secular growers instead!
A: Slow August? Never heard of it! There’s always stocks rallying and crashing and we want to own the prior and short the latter, even in the dog days of summer. https://youtu.be/kYt24hq5nbM
Q: I was pleased to hear you were bullish about the short term prospects of Silver as I’ve been building a position in 2017 calls for a few months as a hedge and because the gold->silver ratio is at historic highs. It seems your bullishness is short term so I was curious if you see any edge in SLV leaps while it’s hated so much right now…they are pretty cheap.
A: I like the idea of owning LEAPS in $SLV better than the idea of owning $SLV itself for the next few years. Especially since, as you correctly note, premiums are very cheap on them right now. I’ll take a look and might add some $SLV leaps if we get one more sell-off in the metal.
Q: What do you think about long dated (1/2017) $P puts with a $10 strike, which are asking $1.44 today?
A: Fascinating analysis we can do based on the coincidence of your two questions — $SLV (the most popular silver ETF) vs $P (Pandora) long-dated options. Coincidentally, $SLV and $P are both trading at about $14 — in fact earlier this morning $Pdropped past $SLV at about $14.50 as $P dropped all the way to $14 and $SLV is down slightly to about $14.40. So let’s look at the options pricing for both and see why I might buy the SLV call LEAPS but probably won’t be buying any $P put LEAPS. You can buy the $SLV 2017 January call options with the $18 strikes that are “out of the money” by $4 for 95 cents. You can alternatively buy the $P 2017 January 2017 put options with the $10 strikes for $1.44. Now…I can picture silver rallying to $20 or more per ounce over the next year and a half which would make those call options worth at least $2 each and they would increase in value dollar per dollar with SLV itself if it climbs over $20. Meanwhile, I can picture $P dropping below $10 over the next year and a half, but $P would need to drop all the way to $8.56 to get it all the way down to just being break-even on those $10 put options. The profit potential vs the amount of capital risked on the SLV long-dated call options then, is probably better than that of the $P long-dated put options. Whew, that was a long answer.
Q: Hi, do you have any opinion on $KO? It seems to be highly recommended.
A: Haven’t looked at $KO in a while, but I liked Robert Marcin’s comment about it on Scutify yesterday: “everyone obsessed w bottom fishing mega cap, no growth names like$ko, $pg, $mcd, and $ibm. just today a leading talking head said no one ever went wrong buying$ko stock. i’d contend everyone who bought the stock in the past 20 went wrong. the stock is below its 1998 high and lagged terribly since this bull market started. thank God mr buffett has an infinite holding period. he will need it to improve $ko‘s performance in the past 17 years. forget about these big, expensive no growth names.” https://www.scutify.com/allstars/robertmarcin?s=55a53c48b6d3771158bf93c3
Q: China seems to be in bad shape and there is no reflection of that here in US. Steps taken like Govt paying corporations to buy stocks, ban to sell major equities for an year, pumping 15 billion to promote buying etc are all seems to be bad to me and i feel they will have worst consequences in future. You have said multiple times that such consequences happening outside US will have only very minimal effect in the companies we invest. But still i am surprised to see market giving less consideration to China compared to Greece. Is market ignoring wisely ? Or will there be a very late reaction ?
A: I think the US stock markets have priced in whatever China’s current market crash/bubble status is. If China’s stock markets crash another 10% or more in the next few weeks — well, I wouldn’t be surprised to see the US stock markets take a hit at that point. But for now I think China’s already discounted in the current quotes here in the US.
Q: Do you think the proliferation of Uber/Lyft etc will eventually change the car rental paradigm? It’s becoming so easy to get around via app perhaps the car rental industry is a broken model. I’m looking at Avis which has an ugly chart especially after the acquisition of the corpse of Zipcar.
A: I like this idea that you’re getting at. I’ll do some work on the theory of Uber-crushing and what ways to play the downside of the losers from this shared-ride revolution that the App Revolution enables.
I’m gonna say good-bye to my daughters (both of them!) and kiss my wife and then off to the airport to head to SF. I’ll be Live Streaming some of the MoneyShow event from the latest Scutify apps which include what we call “Scutify Live.” I’ll be posting commentary and analysis for you dear Trading With Cody subscribers from Cali. See ya later!