Here is the transcript to this week’s Live Q&A Chat. Visit the Trading With Cody Chat room on the Trading With Cody iPhone App, the Trading With Cody Android App or at https://twc.scutify.com/
Q. What are five stocks you would recommend buying today? Thanks for your insights.
A. I would look at my latest positions round up from June 7 (Cody’s Latest Positions Round Up). I would think about scaling into the highest rated stocks in that most recent update which includes Facebook Sony and QUALCOMM and a couple others that are at an eight out of 10 rating right now.
Q: Some investors may be thinking that Google could pick up $TWTR. Would it fit in with their product line? I think so.
A. For the last two years I’ve said that $TWTR would be a great fit for $GOOG but that the anti-trust regulators around the world would probably balk at that deal. And anyway, my point is that $GOOGL buying Twitter is no more likely today than it was last Friday before the blockbuster $MSFT for $LNKD deal.
Q. Cody, I just received this in my email from Zillow. It is a rental property manager toolkit, which is ingenious and helpful. I believe it will drive folks not only to Zillow, but to use Zillow to list their rental properties. I think $Z should be on the Cody list.
A. Steve, I like Zillow a lot. I have written about it many times in years past. I called it one of the greatest apps for all investors because I like to check real estate prices any time I travel. Zillow is ingenious in many ways. I will take a fresh look at it and it’s valuation edits current price and fundamental picture. Thanks for putting it back in front of me. Thanks.
Subscriber follow-up: I think we are going to see a transformation of how properties are listed and sold with Zillow. This is a very, very smart move. The primary reason I use realtors is to get exposure for my property. If Zillow can create that (you don’t need MLS access to list on Zillow), then all of a sudden I can connect to all prospective purchasers without a realtor. I can hire a lawyer to oversee the transaction for well under $5K (actually I am a lawyer, but I am referring to others), as opposed to 5 or 6 percent of my transaction.
All of a sudden, Zillow starts controlling and directing folks’ access to real estate service providers, such as mortgage companies, property inspectors, termite inspectors, etc. Listers and buyers could register and update their “qualifications” such as mortgage pre-qual, home inspections, etc. This direct connection of buyers to sellers, which would eliminate the 5 to 6 percent cost of realtors, would be a HUGE market.
Cody replies: The way you describe it, Steve, makes me want to write “Zillow is the Uber of real estate.”
Q. Your analysis on $NCS please?
A. $NCS has a $1.7 billion market cap, $400MM in debt and less than $100MM in cash. Revenue is supposed to grow about 5% this year and it’s trading at 18x next year’s earnings estimates. As a maker of metal products for construction companies, I don’t see much of a competitive advantage. All of which means, I don’t see much reason to invest in this stock at these current levels.
Q. How about $ATO?
A. $ATO has less than $2.5BB in debt vs less than $100mm in cash. The market cap is $7BB and it yields 2.2% from its dividend. Total Cash Flow From Operating Activities has grown from $613,127 to $739,986 to $836,519 over the last three years, so they should be able to service their debt, but with the stock trading at 25x next year’s earnings estimates on 0-5% projected topline growth — I don’t see much to like in this stock either.
Q. Can you give us your analysis on $HII?
A. $HII has a market cap of $7.5BB and has $1.2BB in debt vs $800MM cash. There’s been little to no revenue growth and that’s expected to continue for the next couple years and the stock is trading at 16x this year and next year’s earnings estimates. Seems expensive to me for a company whose business is designing, building, overhauling, and repairing ships primarily for the U.S. Navy and the U.S. Coast Guard.
Q. $ADBE is announcing their earnings next week. Any thoughts on that business? They seem to have managed the transition from boxed software sales to saas perfectly.
A. Here’s me writing about $ADBE back in 2007 in the FT: “It’s this idea of riding the internet ‘platform’ that is so crucial to investing in technology. In coming years, your mobile phone will become increasingly like your laptop. You’ll have the same programs running on each of them. VoIP software, YouTube and other video sites and browser-based applications will work on any high-end phone just as they work on your laptop. There will even be iChat-like real-time video chat applications on your mobile phone – riding the browser-platform that rides the internet-protocol platform. Google and Apple remain the best plays on this converged platform concept. Adobe is the best play on the video software side.” The fact is though, that I have Adobe software on my Mac and I hate it. It’s almost like malware how it installs into my system, opens up when the computer is turned on and forces me to log out of it every time. Adobe’s always taken the “almost-malware approach” to their software installation and I just have never been able to get over my dislike for the company’s business practices enough to get actually buy the stock. Still can’t! LOL
Q: Cody Have you been doing some homework on GWPH? I’ve been reading some articles like this?
A. Yes, been doing my homework on $GWPH… still holding a small partial position short. I also think it’s good to go back and read my original thesis for the short available here.
Q. I want to add to my $SNE position as I do not own a full one. I have been waiting for a pullback but I am afraid it won’t happen. Do you think we will get a market pullback cause of BREXIT?
A. I don’t think you and I will have an edge trying to time a tranche in a giant Japanese technology/music/TV company’s stock based on trying to game how hundreds of millions of people in Britain are going to vote about their status in the EU. Perhaps if you want to buy another tranche of $SNE but are worried about the timing, you probably should do about a 1/2 tranche now and then do a little more in a few weeks.
Q. What’s the quickest way to check how much debt a company has?
A. Yahoo Finance is probably the quickest way. Use the Long Term debt line on the Balance Sheet page for the roughest idea of a company’s major debt. For example, for NII you see Long Term Debt 1,273,000.