What’s on your minds, folks? I’m going to be standing by and chatting live with you in the Trading With Cody Chat Room (which you can find on the web here or on the Trading With Cody App for iPhone and Android) for the next couple hours, so come on by and ask me any questions or discuss any topics that are on your minds. You can always email your question to me at firstname.lastname@example.org and they’ll make sure I get you an answer.
Here’s a sampling of what we’ve been discussing so far this morning:
Q. $NFLX has corrected around 6 to 7% from its highs. With the company looking to expand outside the US, would appreciate yours views on buying the common or call options at current levels. Thx
A. I’d stick with common stock for $NFLX for now, as it’s still up so huge over the last year and I wouldn’t want to have to deal with trying to time an expiration date. If the stock crashed below $100 at some point in the next few weeks, then I might consider some longer-term call options. But not for now.
Q. Is it time to get out of Apple? It has been pretty flat this year and it appears IPhone sales are on the decline.
A. $AAPL‘s next year will depend on its ability to sell iPhones to the world. The good news is that I think most people prefer to be on the iPhone vs any other platform and that the iPhone can continue to take market share from Android. The bad news is that smartphone growth is stalling. Apple is my single biggest position as it has been for many years and I think it’s a good buy here near $110.
Q. On the GWPH short, it seems like a big deal they failed to show clinically the medicine was any better than a placebo for treating pain in cancer patients !! and say more about it going into the teens eventually. Thanks.
A. Most of the GW Pharma tests have failed. The valuation of the stock even at these levels 25% lower than we shorted it at, is still $1.5 billion and is trading at 25x next year’s revenues. The company is very unprofitable and will continue to be so unless they finally get a big hit on one of their tests, and even then, they’ll have to successfully bring that product to market and fight competition/patents and hope the product takes off in the market.
Q. This Pandora analysis (seems reasoned and reasonable) suggests the only reason NOT to short (or in our case, add to our short) is the possibility of acquisition — that it’s STILL a broken model competitively. Your feelings? Thanks.
A. Pandora $P pops 15% this morning as it gets a favorable pricing ruling that gives the company a chance for profitability some day. I’d covered half of my Pandora short from the high teens/low $20s when the stock crashed a couple months ago. I’m not making any moves on Pandora this morning as the dust settles.
As for the markets, well, there’s a crazy divergence between the average stock and the broader markets and the performance of most funds this year. You see the carnage in so many individual stocks across every sector of the economy and market. For every First Solar, there’s a SUNE and a VSLR. For every Netflix there’s a GoPro and an Outerwall. For every Facebook, there’s a Twitter and a Yelp. Many, if not most, oil and natural gas and pipeline stocks are just trying to avoid bankruptcy now and there are stocks down 70-90% or more throughout the energy sector. Meanwhile, the broader indices are within 5% or so of their all-time highs.
The average money manager is also down big this year, both in the hedge fund and the active managed mutual fund worlds.
In the near-term, there’s likely got to be some reconciliation between the few winning stocks/the broader indices and the average stock that’s been cut in half or worse this year. Such a reconciliation probably won’t be all of one or none of the other. Rather, the average stock is likely to outperform the broader indices in the next few weeks but that some of the biggest individual stock winners will continue to outperform also.
I was searching for an old article I wrote last year about avoiding energy and came across the following, among many others:
January 22, 2015: To recap then — energy sector needs bankruptcies before I’ll buy any energy stocks. Deflation isn’t real. Political and monetary policies continue to point towards more bubble-blowing bull market highs ahead — at least for tech and Revolution Investing stock picks.
December 15, 2014: Most scenarios in a currency war end game with the US Dollar on the winning side vs the other sovereign fiat currencies, as has been the case for the last few decades. But war, including currency war, sucks and war is not prosperous and war destroys value.
December 8, 2014: Oil got crushed again today and the entire energy sector is in fear mode now. It’s best to buy, not to sell into a sector that’s in fear mode, at least most of the time. The question, as it often is, is one of timing. Is it too early to step in and start scaling into energy stocks? Can oil fall to $50 or $40 or lower? Sure. Would most energy stocks be down even more if that happened? Yes. My experience and my gut tell me that it’s still way too early to start looking for a bottom in oil and energy stocks and that it might be wiser to let the fear feed upon itself for a while.
April 9, 2013: I am going to bid for a first tranche of common FSLR stock around $39-40 a share this morning and will use a very wide scale before adding the next tranche, perhaps near $36 or so. Longer-term, this stock could double or triple in the next couple years if they can execute and deliver on the fundamental set up now.
Cody back in real-time now. We’ve been on the right side of the energy trade and our ability to pinpoint strong technology with strong balance sheets has obviously worked out in our favor as the lone energy stock we own, First Solar, is near annual highs even as most energy stocks are down 50-90% this year.
I’d like to have been short Outerwall as it crashed this year, as it’s yet another name I’ve helped us avoid and pinpointed as a short candidate.
Let’s keep our focus, let’s find some more great investments and trades and let’s keep learning together. See you in the Chat!