Q. Do you think this is the market bottom or it may go lower from here? I have 30% cash in 401k, would like to deploy it.
A. Tough to try to time a market bottom short-term. I do think the markets are likely headed higher into year-end and next year, but am not really trying to time that. I do think there are some great buying opportunities out there, mostly the highest-rated stocks from my latest positions round up last week. https://twc.scutify.com/
Q. I am new to the site. Please tell me what a tranche is?
A. I use tranches to scale into my positions rather than just loading up on them all at one price. So if I want to own 1000 shares of a particular stock, I might start with buying 300 shares and then later add another 300 and so on until I get to the full 1000 share position I wanted. Defined: tranche tran(t)SH/ noun a portion of something, especially money. “they released the first tranche of the loan”
Q. Is the downgrade on $TWTR today is having lots of teeth on it? Is the data all from lets call it the OLD $TWTR vs the new one slowly transforming with new CEO new Chairman of the board, tighter ship and the like to go forward and transform it?
A. The problem with $TWTR right now is partly that their user growth has itself stalled. The company will grow revenue per user quite quickly for the next few years and they’ve got 300 million users so there’s growth to be had there. But unless Twitter gets to 500 million users over the next two or three years, the revenue there will stall. That said, Periscope itself could add hundreds of millions of users over the next 3-5 years and that would create a new revenue stream for Twitter anyway. Twitter’s got some deliver some proof with their pudding over the next few quarters or that downgrade will look smart.
Q. Any interest in the cyber security stocks and any opinion on $FEYE ?
A. I’ve got $FFIV as a security play for now, as most of the other cyber security stocks are looking very pricey. FEYE, for example, trades at 5x next year’s revenue estimates and analysts are modeling out years of more losses ahead.
Q. Are you following Wynn? It has Wynn Macau opening in March next year. Can we buy Wynn now down from all time high 240?
A. Remembering the time you, me, Scott Rothbort and other Trading With Cody subscribers ended up at a Carrot Top show which was surprisingly funny and enjoyable at one of the the Money Shows in Vegas, let’s analyze $WYNN. $WYNN is paying a 2.7% dividend, trades at 18x next year’s earnings estimates which I assume include the Macau opening and$2BB cash vs $7BB debt. Not a screaming buy, and I don’t like to invest in a non-productive industry like gambling, so there you go.
Q. I also have question regarding Disney $DIS. It is acting quite well recently and have earnings in couple weeks. One concern is as it owns ESPN and it recently announced plans for 350 people layoff, about 4.3% of total employees. Do you think its DIS buy even now?
A. $DIS‘s a great company and Star Wars will be huge. But ESPN’s and the other broadcast channels that Disney owns are about to lose value. it’s about to get even worse for satellite companies and the traditional broadcast television business model. Why? One of the last bastions of strength for broadcasters is “event programming” like sports from daily baseball and basketball to weekly NFL games and underscored by the ever growing one day audience for the Super Bowl. The NFL makes tens of billions of dollars every year by selling the rights to its games. Clearly the broadcast channels like NBC, CBS, FOX and ESPN are then turning around and selling ads for those broadcast games, also generating tens of billions of dollars in revenues and billions in earnings every year. But as the world’s sports fans increasingly consume TV and movies on apps on their smartphones, tablets and TVs, the need to subscribe to a cable package that used to be the only way to get access to those TV show and movies fades.
Q. Any new thoughts on McDonald’s $MCD going into earnings? Seems like their all-day-breakfast “new thing’ hasn’t been well-received by franchisees and, even if successful, won’r add much to bottom line. They seem to have a history of positive “things” happening before earnings report, earning report being disappointing, and stock drops. Yet the price has hung up for a while. Thoughts on thursday’s numbers? Worth a short-term short gamble?
A. Maybe some puts and/or a small short on $MCD McDonald’s into earnings, isn’t a bad idea. I think the general trend continues to be a healthier-conscious consumer and also that $MCD‘s margins are maxed out. Report is tomorrow morning though, so too late for this go round.
Q. Have you looked at $TWX lately. Is the decline due to cord cutting overdone relative to the content the company owns?”
A. $TWX has some real value in their content, but the broadcast TV stations like TNT and TBS and CNN are going to have to successfully offset the declining viewership of their TV channels with leveraging apps and new ways of viewing video content. Too much debt also hurts. That said, the TV show production, licensing and Warner Bros movie library are strong assets growing in value. HBO is worth about the same as Netflix and I don’t think that’s going to last. Netflix is a better investment for the next decade than HBO is. So I’m not looking at buying or shorting TWX anytime soon.
A. Yes, $AMBA‘s got downside risk from here still if $GPRO itself misses earnings.$AMBA could indeed fall to the $40s if $AMBA‘s earnings report is itself weak but I do think Ambarella has had a strong 90 days and is still seeing big demand from Chinese and other wearables/drones companies aside from GoPro.
Q. Any opinion on $CVLT?
A. I’m not terribly familiar with $CVLT but here’s some analysis on it for you – the company’s got $9 per share net cash and trades at 36x P/E and a 25x EV/earnings ratio. Revenue declined 4% this past year and is expected to only going to grow single digits next year. So the stock’s not terribly cheap and not a big growth story and despite the nice balance sheet, I’m not terribly excited about it.
Q. What would be a good entry point for AXGN?
A. $AXGN trades so thinly that I am looking to use like 1/10th sized tranches to get started.
Q. Congrats on the $VRX trade- wow, as you would say, you ROCKED it! So, you don’t think it was a buy today when it hit $88.50- $VRX. Those shares you bought could turn into a long term hold, who knows. I own a mutual, one of the safest most conservative funds around. $SEQUX– For years it was closed to new investors, very staunch conservative NYC management. Turns out they had 28% of the fund in $VRX. The fact that these guys have so much trust in VRX means something to me. Not sure what tho- 🙂
A. I was pretty lucky on the timing, but my analysis on $VRX and their business model was dead right. Well, I did buy some $VRX shares to cover some of the $VRX shares I’d shorted last week. But I do think the company’s in trouble.
Q. And now that we have this new news about Ackman’s purchase of $VRX — a guy the market both loves and loves to hate — does this give you any confidence in further moves re: Valeant — will the jump up be short-lived on a further trip to the bottom? Or, for those of us who missed the short, is it just watch and wait?
A. Good question and I was just thinking about that while listening to the report about Ackman buying some 2 million more shares in $VRX. I repect Ackman’s stock picking and it does give me pause to shorting more $VRX vs. just riding out what I have left after having covered some around $100 today. I think $VRX has pricing problems and will have trouble meeting estimates in coming years but what a ride we’ve already had. I’m just going to sit tight for now with the pretty small remaining short position I have left. Note that short positions get smaller relative to the rest of your portfolio as you make more profits as the stock drops.
Okay folks, that was a great chat. Thanks and talk to you later!