Q: What does your GUT and sources say about this CRASH? The start of a bear market? Other? Tell us what goes through your mind? Thanks
A: I think this market downturn is a crash-ette, not a full on crash. I’m not terribly surprised to finally see a 10% plus correction in the markets. One good thing about this downturn is that it helps the market work through the companies who aren’t going to make — who have too much debt and/or are too leveraged to energy prices and/or have just not delivered on the growth and earnings that shareholders were hoping for. There’s getting to be some wheat out there amongst the chaff and I am indeed slowly getting more long exposure these days as you might expect given our playbook.
Q: I am about 50% in cash right now. I am wondering how and when I put it back to work. Is it time to slowly add? Or wait more for a retest of previous low. I don’t want to be aggressive here but I don’t want to stay underinvested and miss the train.
A: No easy answer on that question for sure. I do think the stock markets are likely to be higher this time next year from their current levels and that we could go quite a bit higher than that in the next couple years or so. But more to the point, I think there are some bargains out there and when the panic selling hits, I have been and will continue to scale into more long exposure. No rush, but I do think you can use small tranches to slowly build into your stock positions and then get more aggressive if/when the next panicky sell-off kicks in.
Q: Are you planning on keeping your $GDX positions? if you are, please can you elaborate a little in this? Thanks
A:Gold is shaping up near-term to be go into potential rally mode as a perceived safe haven as the markets turmoil continues. Meanwhile the gold miners are probably a leveraged bet on gold spiking to $1200 or more as the $GDX could likely go to $20 if gold runs that high. I’ve taken some profits on the $GDX calls already and am planning for now to let the rest ride.
Q: Could you remind us which GDX calls you’re still holding. December, right? Strike(s)? And does “let the rest ride” mean you’d counsel against someone adding to their stash of these?
A: I’m looking at $GDX getting crushed again and I’m just letting my remaining$GDX calls ride. It’s a tiny position and I’m not sure I’d want to add to it right now. I own December call options.
Q: I have quit a few shares of $AMBA that I have built up over time. My cost basis is a bit higher than where it currently trades but do you think with earnings coming up it might run into them? Possibly this market will not allow for that. Should I buy protective puts prior to the earnings? Longer term I do believe in the company.
A: You are right in your implying that the bar is probably set very high for earnings reports to catalyze a big near-term stock pop. Lots of shorts in $AMBA are just as worried about that potential as you are about a potential sell-off. The options premiums on $AMBA are quite high, so it’s tough to successfully hedge your common stock there too. Trying to game a single earnings report is always hard and I just don’t have any idea what to expect for $AMBA outside of expecting another strong growth report.
Q: I’m still holding $TWTR. I’ve been adding on the dips per your recommendation, but am down substantially on that name. What are your thoughts going forward in terms of recovery, timing, overall view of the company?
A: For the last couple months, since $TWTR CEO Dick Costolo left, I’ve been saying that $TWTR doesn’t have much upside catalyst near-term. They desperately need a new and brilliant CEO and the longer the company takes to find one, the more the world is passing them by. Longer-term, if they can find a good CEO the stock could have huge upside.
Q: Your thoughts on $FSLR?
A:$FSLR is doing well, growing and solar costs are coming down but as long as oil heads lower, there are risks that solar demand will pause.
Q: I know you are not keen on China but do you think this would be good place to start positioning in $BIDU. It seems to me the pendulum has swung pretty far to the opposite direction during this selloff. I have held off starting position so far and that turned out to be a good move.
A:Wow, $BIDU has really come down hard along with the broader Chinese stock market.$BIDU‘s chart is ugly but sometimes that can mean it’s a great time to buy. I wouldn’t go crazy, but if you wanted to build up a long-term position in $BIDU, it’d be best to start slow and leave yourself lots of room to add if it fades lower.
Q: A little blast from the past: Barnes &Noble. Do you see any viable short or put play on either the original $BKS shares or the spun-off company? I’m assuming you’re still negative re both.
A. The problem with trying to short $BKS or its spin off is that there’s still revenue there and financial engineering potential for the company to play with. I’d rather be short than long either company, but I’ve no appetite to short it personally right now.
Q: Any thoughts on $MSFT here—gotten killed–good dividend??
A: $MSFT has that 3% dividend which is better than a sharp stick in the eye in a time of 0% rates. The company has missed the App Revolution entirely though and it’s unlikely to catch up. The stock is probably priced a little bit expensively but the market sees longer-term growth potential in Microsoft Cloud and other avenues.
Q: I asked you about $DIS just before this last earnings call as it was firing on all cylinders. Your response was to agree with my observation but you felt it was priced to perfection. I sold out all my call positions before earnings based on your thinking and obviously am happy I did. THANK YOU! I was strongly considering holding through those earnings. Do you feel this is a good time to scale in to some common?
A: You look back at a year chart on $DIS and you see the stock is still up 10% from last year’s levels and a five year chart is even more upward directed. I do think, as usual, if you like$DIS long-term that starting with a 1/3 or less sized position to get started is the way to go.
Q: Any thoughts on $BIIB, Biogen with the huge pullback it has seen.
A: $BIIB and biotech in general still seem very bubblicious to me and there could be some serious downside in that sector in particular if this ongoing market correction picks up steam. I am sorta ticked off at myself for not having bought some $IBB puts when it hit $400 a couple months ago and topped out, but no looking back.
Q: Hi Cody, I hope Amaris is better and better everyday.
I think global economy will be weak this and perhaps next year. I also believe interest rates will be low and FED will not rise rates this year. Have you thought in high yield income stocks opportunities for the portfolio?
A: Let me run a screen on high-yielding stocks and I’ll write up a report on it in the next couple weeks. Good question, thanks and thanks for the kind words.
Q: Have you looked into companies like $LC Lending Club, what think of the peer to peer lending model? Both in buying the company’s stock and investing as a lender? What about being a lender on lending club as a way for some decent returns? What would be your biggest concern in buying notes?
A: My gut is that I don’t like the peer-to-peer lending model if only because I’ve met several companies with that model over the years, and I’ve never grown to like any of the founders/CEOs. $LC is looking at nearly doubling revenues this year and another 50% growth next year if the analyst estimates are right but the stock is trading at 8x sales and is barely turning profitable, so there’s a lot of risk still baked into the current quote. I haven’t done that kind of homework on $LC but any time you lend someone money you’re taking a risk.