Here’s the transcript from this week’s Live Q&A Chat.
And Fitbit now up 30% from where I bought more of it just five trading days ago. I’m going to trim 1/10th of my $FIT position, locking in some profits on that big of a move.
Q. Good morning/afternoon, Cody. On the possible theory that he who hesitates may be lost — I stalled a little on adding FIT when you added the other day. Now it’s jumped 30%$ — bravo — so my Q: should i now wait for a dip for my first tranche, or wait for the market reaction to FOMC? Or just get in today? I’m really liking the stock. Thks.
A. If you missed the $FIT crash last week and don’t own any shares at all, I’d still probably look to do a 1/5th, small-sized tranche to get started. The stock is cheap at $33 but still cheap at $39 and still has a lot of potential upside if it grows as fast we think it will over the next two or three years. (I am however, trimming some of it today above $40).
Q. Does fit have any competitors??
A. Most people think of the Apple Watch and other smartwatches as the biggest competitors to $FIT Fitbit. But I recently explained that “I think we can expect to see up to 5 or 10 billion units of various wearable devices sold in a single year’s time by say 2019 or 2020. Fitness wearables could alone count for several hundred million units sold per year and Fitbit could itself keep 50% market share in the fitness wearables market alone. If Fitbit sold 100 million wearables in 2020 at an average cost of $150 each, we’d be talking about $15 billion in revenue.” https://tradingwithcody.com/201…
Q. Maybe walmart cost kohls will be next for fit products? It makes a lot of sense.
A. Maybe all retailers, maybe all employers, should promote health and fitness for their employees using $FIT. 🙂 Target’s partnership with Fitbit is one of its biggest corporate accounts for the activity tracker company, Kozlak said. Target employees will get the Fitbit Zip, which retails for $59.95. Target is now offering the company’s activity trackers to its 335K U.S. employees, becoming the latest firm to turn to wearable devices to improve worker fitness and reduce healthcare costs. While corporate services generate less than 10% of Fitbit’s revenue, it’s “one of the fastest-growing parts of the business,” Chief Executive Officer James Park said in an interview.
Q. Hi, Cody. You have mentioned a few times that $TWTR is essentially dead money until they add a CEO who can give the company some better direction. I also understand the thesis about Periscope being a nice asset for the company, but can you help me understand the rationale for scaling into $TWTR over the past few months, if the outlook for $TWTR is several years out? Thanks!
A. Well, I’d first bought $TWTR, including some call options a few months ago when they still had a CEO. We caught some huge profits on it and trimmed it down and took a bunch off the table when $TWTR spiked to nearly $50 a share afterwardhttps://tradingwithcody.com/201… I can’t know for sure that the stock will be dead money until they get a new CEO, but I am more confident about how the company will grow and make its shareholders billions of dollars in profits over the next five to seven years, so I want to continue to have a small position in the name and will probably add to it again at some point when they get their groove back on and/or when they announce who their new CEO is.
Q. Also on Twitter/Periscope: yes, it’s cool, (and BTW, do you have a sense of how many people tuned into your session yesterday?) . . .but does Twitter have a proprietary hold on the app/function? Seems like others with $$ — a la FB or perhaps others — won’t let something this good be “owned” by TWTR alone — with their vastly larger member bases to promote it to. Is it totally “safe” for Twitter? Thoughts? (I’m referring to some kind of a workaround patent re Periscope, of course.)
A. There’s definitely risk to the Periscope concept of streaming live video but like most apps and sites — there will be one killer and lots of littler competitors. Think of YouTube and how it had such a huge lead and hit critical mass so early that it has remained the de facto standard for user-generated/uploaded content for ten years now. I would expect that Periscope becomes the de facto standard for people to find other people’s live video streams, so in that sense, the competition would dwindle as Periscope grows to critical mass. If Periscope can hit hit 100MM users, up from the 10 million or so that are on it currently, it’ll probably be un-beatable at that point. For the record, a couple months ago we added a Scutify Live feature for finance/stock/traders/pundits to stream their live video feeds and seminars on Scutify, so we are in some sense competing with Persicope already too!
Q. Is gpro also a media company??
A. I don’t think of $GPRO as a media company. I think the company has tried to rebrand itself as one, but I picture and own $GPRO as a wearables play. GoPro, as I’ve long said, should have been in the Live Video Streaming business long before Periscope got on the radar. $TWTR, $GPRO.
Q. Any opinion on simo? Thanks.
A. $SIMO is cheap. It’s got a $900MM market cap and has $200MM in net cash. The company could earn $2.40 next year on nearly 20% revenue growth. That gives it a single digit EV/Earnings and I’m seriously considering adding some $SIMO to the portfolio.
Q. Hi Cody any thoughts on CG (it has 14% yield and is near 52 wk lows)?
A. Wow, I show the $CG Carlyle Groupe at 17%. That probably means the market is expecting them to have to cut the dividend very soon. With $17BB debt on the balance sheet, the company’s obviously leveraged to the economy and its various businesses. I’d be worried insiders at $CG will always win and that shareholders of the $CG stock might not be as lucky. And reading over the company’s own description of its businesses seems like they must be joking: “The Carlyle Group LP is an investment firm specializing in direct and fund of fund investments. Within direct investments, it specializes in management-led/ Leveraged buyouts, privatizations, divestitures, strategic minority equity investments, structured credit, global distressed and corporate opportunities, small and middle market, equity private placements, consolidations and buildups, senior debt, mezzanine and leveraged finance, and venture and growth capital financings, seed/startup, early venture, emerging growth, turnaround, mid venture, late venture, PIPES. The firm invests across four segments which include Corporate Private Equity, Real Assets, Global Market Strategies, and Solutions. The firm typically invests in agribusiness, ecological sector, airports, parking, Plastics, Rubber, diversified natural resources, minerals, farming, aerospace, defense, automotive, consumer, retail, industrial, infrastructure, energy, power, healthcare, software, software enabled services, semiconductors, communications infrastructure, financial technology, utilities, gaming, systems and related supply chain, electronic systems, systems, oil and gas, processing facilities, power generation assets, technology, systems, real estate, financial services, transportation, business services, telecommunications, media, and logistics sectors. Within the industrial sector, the firm invests in manufacturing, building products, packaging, chemicals, metals and mining, forestry and paper products, and industrial consumables and services. In consumer and retail sectors, it invests in food and beverage, retail, restaurants, consumer products, domestic consumption, consumer services, personal care products, direct marketing, and education. Within aerospace, defense, business services, and government services sectors, it seeks to invest in defense electronics, manufacturing and services, government contracting and services, information technology, distribution companies. In telecommunication and media sectors, it invests in cable TV, directories, publishing, entertainment and content delivery services, wireless infrastructure/services, fixed line networks, satellite services, broadband and Internet, and infrastructure. Within real estate, the firm invests in office, hotel, industrial, retail, for sale residential, student housing, hospitality, multifamily residential, homebuilding and building products, and senior living sectors…” You get the idea. What business is $CG in? Every business, I guess. My favorite part of that whole description is the use of the term “The firm typically invests in…” and then to go on and list every category of business I’ve ever dreamed existed.
Q. Thoughts on KORS , it is a brand that is very popular among young people ans is near 52 weeks lows? Thank you so much.
A. $KORS is dirt cheap, but I’m not sure it’s margins and earnings are sustainable. The stock is worth $9BB, they have $1BB in cash and they trade at 10x next year’s earnings growing the topline 6%. Robert Marcin, my mentor when it comes to value investing wrote this recently about it: “it’s not just the p/ ratios that are sustainably high. its the profit margins as well. look at $kors. it trades for 10x’s profits. dirt cheap in this market. and its on my new buy screen. but i cant pull the trigger. stock is 200% of sales w 20% net profit margin. that compares to $rl at 150% of sales and a 10% net margin. if $kors hits a serious bump in road margins could drop to 5% or 10% down from 20%. and a 10 p/e on 10% profit margins would mean a 50% decline in the stock from here.” https://www.scutify.com/allsta…