Here’s the transcript from this week’s Live Q&A Chat. have a great Thanksgiving, everyone.
Q. Only a handful of stocks that carry this market, i.e. the Nifty Ten. Are you concerned this will end badly like many times before?
A. I’m quite positive that the markets will crash several times again in my lifetime and that this will “end badly” at some point which will probably be another great time to start loading up in stocks like we did in 2002 and in 2010 the last time “it ended badly.” I plan on trying to be bearish and/or much more in cash and/or with more short positions when it’s the right time to do so BEFORE it ends badly, but not too early either! I nailed the top in 2007 by predicting the 2008 financial crisis/real estate crash and put my money where my mouth was by closing my hedge fund and taking a reprieve from trading/investing with my TV show. I put a lot of pressure on myself to have an independent thinking and analysis for the economy and its political/monetary drivers and cycles so stay tuned!
Q. The whole problem with $TWTR is that the instant we decide to take our money out of it will be the instant it rockets upward. The bad thing with $TWTR is that they have a part time CEO; he can’t be serious about the company even if he is capable of monetizing $TWTR.
A. Remember that Steve Jobs ran two companies at once while heading up Apple, but yes, I wish they’d gotten a CEO that wasn’t moonlighting somewhere else as a CEO. Don’t look back at $TWTR. I’ve seen the best traders and hedge fund managers in the world take a loss on a stock and then see that it actually help put in the stock’s bottom.
User comment: Steve Jobs was off the charts. He doesn’t count. This has the smell of a bunch of kids who got control of a company. There is no point in thinking about the details of the company any more. Just got your message-to be honest, I hate the stock so much that it doesn’t matter what happens right now. I feel better.
User comment: On the subject of people splitting their CEO responsibilities — that guy named Elon Musk hasn’t done half bad either.
Q. I believe you said you were waiting for some bankruptcies to occur before considering making moves in energy. Comments on the following? (Also, could you cover this subject in tomorrow’s Q and A?) Thanks. http://www.valuewalk.com/2015/…
A. Great information in this article, thanks for sharing.http://www.valuewalk.com/2015/… “There have been 36 North American oil and gas producers that have commenced Chapter 11 bankruptcy proceedings so far this year, according to law firm Haynes and Boone LP’s inaugural Oil Patch Bankruptcy Monitor. These 36 firms have collapsed owning a total of $7 billion secured and $6.1 billion unsecured debt to creditors. The total loss to creditors is an estimated $13.1 billion. 16 of this year’s bankruptcies were filed in Texas, with another six in Canada, four each in Delaware and Colorado and the rest in Louisiana, Alaska, Massachusetts and New York.” Those numbers are big, but not that big as there are many energy companies that have more than $10 billion in debt some of which are likely to go bankrupt also before this part of the energy cycle plays itself out.
Q. So your thinking is we haven’t yet reached the point where you might consider jumping in in some way?
A. Correct, I’ll let $FSLR remain my only exposure to the energy sector for now. I might or might not ever buy other energy stocks, because the other point I’ve made all year and throughout my career is that it’s much more profitable to focus on Secular Growing Revolutionary Companies rather than Cyclical old world economy sectors like energy.
Q. Anyone have any advice on Cisco? I have about $22,000 invested in it. Wondering if I should sell it so that I could buy some of this stuff with the money. I’d have to pay taxes on about a $14,000 gain.
A. Congrats on the triple on your $CSCO stock. I like Cisco and it remains a primary beneficiary of the endless move to networking/app/cloud revolution. Pays a decent dividend but isn’t hardly growing these days, making it rather cyclical rather than secular growing. I wouldn’t let the tax bill be the determining factor in holding or selling it. Maybe sell half and buy something fun with $11,000 instead of all of it at once?
Q. I saw a Dremel 3d printer today in Home Depor, not bad for $1000. Just makes me think how many more will come out with their own 3d printer. Are there components providers to make money off of? If SSYS, DDD and the other 3-D Printer companies don’t have anything proprietary and there are many brands of printers, maybe the suppliers are a better target as an investment then the printer makers themselves.
A. This is a great idea and thank you for spurring me to go find the answer. “Are there components providers to make money off of ? Maybe the suppliers are a better target as an investment then the 3-D printer makers themselves.”
Q. What are your thoughts on EXPE?
A. $EXPE is growing 15-25% per year and trading at 20x next year’s earnings estimates, pays nearly 1% dividend yield and the competition that should have been in the travel industry has been allowed to be rolled up into an oligarchic situation, meaning margins are high and innovation are low. Not a bad stock and one along with $PCLN that I wish I’d had bought back in 2011 when I first started investing again.
Q. Can you take a look at $YELP again? Something is up. It steadily moving up since after earning reports.
A. I was just thinking I should take another look at $YELP after it came up on a “Coffee in Carrizozo NM” mobile search I did (I tried to do the search with Siri, but Siri doesn’t know about the town “Carrizozo NM” apparently). Anyway, I thought to myself that YELP is still quite relevant and if Google doesn’t kill it, somebody like $IACI or even $PCLN should buy it. I’ll work on it next week when we’re back from the holiday.
Q. I am vaguely thinking of Salesforce. How do you feel about it?
A. $CRM is growing 20%+ every year and is one of the best run companies in tech. The stock is always expensive because of this and it remains so at more than 80x next year’s earnings estimates and at 7x next year’s sales estimates.
Q. I think I agree with you on Pandora’s ultimate direction being down to single digits, so I’m holding the short. But do you see any chance of one of the competitors coveting their current membership and thus buying them out (ergo, not good for the short)? Has anyone analyzed whether their membership is accretive (i.e., non-duplicated) to their major competitors?
A. I’ve not seen any numbers of duplication vs accretive membership at the online music service companies and you’re right that it’s possible someone with deep pockets could covet some of Pandora’s built-up mass. But I think it’s unlikely $P does get bought. I’ve covered a good bit of my own short in the name to lock in some profits, by the way.
Q. I am cashed up at the moment and am looking for a few stocks to invest in. I only have money loaded on a margined account at the moment so would prefer to do it there, buying into the big 3 is very expensive, ie. Facebook, Apple, Amazon – what would you advise if I had 50k and am fairly open to slightly higher risk ( I am 41 with a young family, good earnings).
A. I don’t think you should worry about the high stock prices for an individual name like $AMZN,$GOOG, $AAPL or $FB. You can always own fewer shares as what’s important is the relative weighting of each position in your overall portfolio, not how many shares of the stock you own.$50k is enough to diversify across a dozen names or so and I would suggest using the highest-rated and largest positions along with the Trade Alerts I send out as guides to help you get that money to work.
Q. Speaking of shorts present and past — how about APOL. We made $ on that losing/corrupt biz model — though got out of it too soon — and then it plummeted again with the recent ER. I can’t ever see things getting better for this company. Does it ever make sense to get back in with a further short at this point? Or is the horse (or Pyrenees in your case) out of the barn on that one?
A. $APOL was a $6 billion company when we shorted it back at $55 a few years ago and though I covered too early catching only about half the crash of this stock, it’s now down 90% from those levels and is a small cap stock at $700 million market cap. And guess what — the company has more than that in net cash on the balance sheet, meaning that the market now fully expects what I long said — the value of the underlying for-profit education business is zero. I suppose with the stock trading below its cash levels, it’s probably not a great short these days.
Here’s the original write-up in which we absolutely NAILED the top in $APOLand the reasons it was about to crash. New trade: Flunk this for-profit educator December 13, 2011 By Cody Willard “Any system that needs to be subsidized is a system that shouldn’t exist in the first place. Based on that idea I’m adding a new short this week to the Revolution Investing portfolio, Apollo Group $APOL“… https://tradingwithcody.com/201…
Q. Did you check FB’s 360 degree videos. Its amazing. I think it will become the next “selfie”.. Was googling how those videos were made. FB only explained on how to upload it. Any idea how to capture it ? Any smart phone that comes with that feature will have additional selling point. If $GPRO can capture 360 degree videos, do you think it will help that stock in long term ?
Q. Why are you not planning to start a hedge fund again ? I was going thru my 401k statements and it actually reduced by 1% this year. All the available plans were also down. That made me think this question 🙂
A. Funny you should ask, as I did consider starting one back in August when stocks were crashing and the set-up for buying was starting to look very good again. I talked to my old hedge fund attorneys and even spoke to Robert Marcin and we had some serious discussions about maybe launching a hedge fund together. But it was all going to be just too much time and pressure on me given that I’ve got two little girls who need my attention. I might start a hedge fund again some day when the opportunity and timing is right. Very, very few money managers had a good year this year — and I think the Trading With Cody value proposition and the stock picks/trades/investments we’ve made along the way have delivered great results not just this year but for the last few years since we launched. Rock on.
Thanks and see you in the Chat Room over the holidays if you pop by. It’s the holidays, let’s go play. 🙂