Here’s the transcript from this week’s Trading With Cody Livestream Q&A chat.
Welcome to another episode of Cody Underground, also known as the Cody live Q&A stream. I think we’ll be talking about some themes for the stock market for 2018 and we’ll talk about some revolution technology themes for 2018 and taking questions.
First off, an announcement — I’ll be at CES next week with my company The IAm App. The makers of The IAm Cody Willard App obviously, along with The IAm Neil Patrick Harris App. I’ll be at CES with Neil Patrick Harris and Terrell Owens and Bobby Farrelly (writer/director of Something about Mary, Dumb and Dumber and all of the Farrelly Brothers movies).
We will be having some big announcements, including with Samba TV. We’ll be talking about The IAm Neil Patrick Harris App, the new T.O. sports network called The T.O.tal Sports Network App (which is hosted by Terrell Owens and will also be available next week). That’s a little exclusive information there for you people watching and listening today. We have an app called The IAm Farrelly Brothers App and we have another announcement with them as well, so stay tuned.
If you’re at CES, give me a shout. You can just email cody@theiamapp and let me know you’re going to be at CES, tweet me, whatever, reach out to me. Let me know and let’s get together. I’ve got a bunch of meetings lined up with driverless car companies. We’re taking The IAm Apps and not just putting them into millions of TV’s, but putting them on driverless cars in the dashboards. People are going to be watching dashboards — it’s the new living room. The driverless car is the new living room. So we’ll be meeting with driverless car companies and working on partnerships.
Also, by the way, at 2pm on Monday January 9th I’ll be hosting Neil Patrick Harris on a fireside chat at CES in the Pinyon Ballroom at the Aria. Go to ces.tech and search for Cody Willard or Neil Patrick Harris. This just came up this week so stay tuned for more information about it.
Let’s get into some jazz and talk markets, economy and economic themes for 2018. Stocks are up through the roof for the first two days of trading in 2018. Yesterday morning I sent out a report to Trading With Cody subscribers and, coincidentally enough, it was called Stock Market and Economic Themes for 2018. Here’s some of the stuff that I listed:
A continuation of Republican Democrat Regime policies that fuel corporate earnings and stock market prices with the latest even more complicated tax code with yet more loopholes and carveouts. The 2008/2009 bailouts under Bush and Obama, Obamacare, the latest tax bill — these were all written by and created to profit giant corporations.
Continued strength in the corporate economy, partly if not largely fueled by those aforementioned corporate-focused policies from our government.
A continuation of the trend of slow moving, barely higher interest rates with a focus from the Fed on keeping the bull market and easy access to money at below-market rates for giant corporations and banks.
Most likely a continued bull market, fueled by these underlying economic/political trends. At least for now, of course, but someday all imbalances in the economy come back to create losses as the piper gets paid.
Definitely a continued focus on stock picking. I have a couple smaller cap and a couple new larger cap stocks I’m planning on buying into the new year, and those at tradingwithcody.com will be the first to know of course. They will get a trade alert when I’m doing those trades and along with analysis of each stock and why I’m doing the trade.
Some new trends in the stock market to look out for, by the way:
#1- Marijuana-related stocks coming public. Hopefully some good Revolution Investing opportunities included.
#2- Blockchain/bitcoin stocks coming public. Hopefully some good Revolution Investing opportunities included.
#3- Yet more more growth in money flowing into start ups from venture capitalists and angel investors.
What will be the most likely thing to catalyze a crash or a change in those trends? If you noticed, all of those trends are sort of about bull markets and corporate earnings being strong. It’s like I always say, “We can fight it politically,” and I do, “but the reality is that in our investments we have to embrace it.” We have to position our money to benefit from bull markets and bubbles that have been blown up for the last seven or eight years. I talk about that everytime on these Livestreams, and how we positioned for them back in 2010, and how they’re here now.
I do think that it makes more sense to trim right now than to be buying aggressively right now. I’m talking longer term. Maybe over the next three to five years there’ll be a great opportunity to buy some stocks in a crash or something again. I don’t know that it will happen in 2018, but there are some potential catalysts including a crash or two in emerging markets, or a spike or crash in the U.S. dollar.
Although, I don’t think a crash in the U.S. dollar is very likely. I actually think the Euro could. It’s at three year highs relative to most currencies- a basket of developed economy currencies at least. It might be right for a pull back in 2018 and that might cause some disruption.
As the stock market sort of showed the last two days, this has been a very strong bull market. It doesn’t hurt to put on some hedges. I bought some puts a few weeks ago. I’ve lost money on those puts, but as a wise wise mentor hedge fund manager friend of mine used to say to me back in my hedge fund days, “May you always lose money on your hedges.” Because, if you’re losing money on your hedges then it should mean that you’re making money on your broader portfolio because the hedges are just that- they are there to hedge against something else, they’re not the bet!
And yes, Facebook, Apple, Google, Nvidia up 7% today; one of my biggest positions since it was at thirty frankly, as TradingWithCody Subscribers know. Those are the trends and they’re here.
I’ve been saying this for seven or eight years now and here’s one other thing that I always say, “What else could catalyze a crash? Well, who knows what?” We know that we don’t know what might cause the next stock market collapse, so we always need to be prepared as valuations and prices go higher.
It’s not like it’s a ticking time bomb and there has to be another crash soon or something, but we have to be aware that there could be and we need to be prepared. We don’t want to be caught in pain if the markets are down twenty or thirty percent in the next few weeks, which I doubt is going to happen. And yes, it will be painful frankly. Unless you’ve sold everything and/or bought a bunch of puts right before that, it will be painful.
Now is the time to think about whether you’ve got too much invested. If right now you know that if there was a 20% pull back in the markets that you could sleep at night then you’re fine. However, if right now you’re so aggressively long that if there were a 20% pull back that you’d be crying and losing sleep and panicking then as Jim Cramer always says, “Sell while you can, not while you have to.” So, sell while you can! Prices are at all-time highs. You don’t have to catch the exact top tick completely leveraged up. Be cool, man. The two most important words in business and perhaps in love, be cool.
You know why I like solar better than wind in alternative energy? As I’ve written about for many years, it’s because there are fewer moving parts in solar than in wind. And, as your keyboard gets worn out but your glass screen on your smartphone does not get worn out, there’s parallels. There’s physical things that move. Movement causes friction, friction causes breakage.
My first boss on wall street was, at the time, a seventy year old Hungarian who survived the Soviet invasion of Hungary. He was a Jewish guy who escaped prison camps and escaped the country and came to the United States and was very intense. The way I got the job was because he had written a book. His name was Andrew Lanyi and he wrote a book called Confessions of a Stock Broker. It was one of the books I had bought at Barnes and Noble when I moved to New York City to go to Wall Street.
I was sending my resume over and over to anyone whose books I had read and thought might hire me. He was one of them, and about the fifteenth time I sent him my resume I had called after to see if anyone would answer, then someone answered my call. It was the office manager. She said, “If you sent your resume in fifteen times,and by the way no I haven’t seen it, but if you sent it in fifteen times can you come in for an interview tomorrow? You’re the type of guy we’d want to hire.” So, I ended up getting a job working for Andrew and he was an intense guy.
I just pictured him right then with him being on a call with one of his clients. He was a classic retail stock broker and the guy would be dialing, dialing, dialing with two phones going and he would take the phone call as soon as we had either a prospect or a client on the phone. He would just take the phone and I just pictured him being on the phone with a client or whatever and me not having that account up and ready on the call. He would slap the table and give me this glare. He would be so nice to the client until he hung up and then he would just rip on me.
He broke me down. I was living there in New York by myself, it was very lonely. I was twenty-three years old, but it was good for me. It taught me a lot about business. Although, I didn’t stay with him forever. I left soon, maybe after a year. But anyway, I still think of him all of the time in instances like that cause he would always say, “What business are we in? No, that’s all BS. We are in the results business.”
Q. Happy New Year’s! We wish you and your family a healthy and happy new year. I know you are still bullish, generally speaking, How will we know when to sell or go short? How will we know when the bull market is over?
A. Thanks Ray. Happy New Year! And to answer your question, they ring a bell. It’s pretty simple and straightforward. Just stay tuned and listen for the bell. I’m being facetious, of course.
Look, we need to look for catalysts. There’s reasons I turned bearish in 2007 when I closed my hedge fund and took the TV job and told people on TV that I got out of stocks for media. It turned out that I did exactly that for about three years and then I went back to stocks.
The reason I got so bearish and closed my hedge fund and sold all of my stocks was because of the real estate crisis. The real estate around the country was starting to pop. Several places had seen crashes and the banks were over levered and the whole thing was a shell game. AIG had sold insurance that they didn’t have the money to pay for and etc.
You got to look for stuff like that. There needs to be some dislocations. Most stock market crashes are financially related, right? There’s usually a financial crisis or something like in 2008. And, when people are over exposed and suddenly there are disruptions in the markets, that major volatility is often a sign that it’s time to not necessarily sell or go short entirely. I don’t think the vast majority of my TradingWithCody subscribers would ever really want to go entirely to cash or go short the market. We’re not hedge fund guys and I’m not running a hedge fund.
But yeah, maybe buy some puts. Maybe put some more short positions and hedges on the portfolio and take some more profits. As you’ve seen, I’ve been doing that. I’ve been reducing some of the positions that I own over the last few years and again recently in the last few weeks, and I bought some puts occasionally.
Look, they don’t ring a bell, and there’s nothing easy. I’m going to be paying every bit of attention that I can and reading every conspiracy theory and every bear, whether he’s a perma bear or a new found. Are there very many Cody Willard’s out there that are willing to go from bullish to bearish? There’s not many. Most of them are either bullish or bearish for most of their careers.
My good friends Larry Kudlow and Peter Schiff are good examples of one doing each of the opposite. Larry is always bullish and Peter Schiff is always bearish. They may even dispute that, but who knows? That’s my personal interpretation after having followed them off and on for many years and/or partnered with them on TV shows and apps.
What I’m getting at is this, I don’t know but I am going to be trying to help. I’m not going to sit by idly and hope that the market tells us when to sell. I don’t expect to catch the exact top. In 2007 I sort of did, but speaking realistically that’s not going to happen again. I think we’ll miss at least part of the top. Let’s be realistic. Maybe I’ll be a little early, maybe I’ll be a little late. And again, I don’t think that we should completely flip flop from all long to all short. Investing can be done more art than science and that would be a classic example of why.
Q. Cody! Hi, this is Wayne. Hi Wayne. How are you, sir? I’m good. I just signed up today, so I’m happy to be on the phone. Can you give an update on Palo Alto Networks?
A. I think I can do a decent job on that. First of all, let me thank you for signing up at tradingwithcody.com. I’ll work my butt off to keep our returns and our out performance going. And of course, there’s no crystal ball and I’ll make some mistakes along the way.
Now, that said, let me answer Palo Alto as best as I can. I was out in San Francisco recently and stopped by and chatted with some guys from Palo Alto. It wasn’t supposed to be incredibly insightful. It was just sort of a get-to-know as much as anything and maybe the next time I’d talk to them I’d try to get some insights. Frankly speaking, in the last few weeks I haven’t done a bunch of work on Palo Alto.
As you know, if you probably signed up today, I’ve just published a book The Bitcoin Revolution and The Great Cryptocurrency Crash which is available at tradingwithcody.com. So, I haven’t done a deep dive on Palo Alto recently other than the latest positions write-up that I sent out just the other day. If you go to tradingwithcody.com as a subscriber you’ll see it across the top on the menu bar- ‘latest positions’. Click on that. I’m actually doing a write-up with the latest and I’m actually going there now to use it as a reference point for this question.
In my ‘latest positions’, I do a write-up on each stock with an updated analysis and a new revolution investing rating on a scale from one to ten. Palo Alto is currently a number eight rated. I might even make it a nine rated, frankly. I’m about to buy some and I’ll probably nibble a little bit more myself here soon. And even on there I say, “I should do a deep dive analysis afresh on the stock.” Stay tuned for that in the new year. I will be doing that. I’ll do that in the next week or so and send it out.
In the meantime, the long story short is that this remains my favorite cybersecurity pure-play, and I think cybersecurity could be a hot stock trend in 2018, frankly. If this is the best of them then it will be a big mover. And so frankly, I think it could even get to $250 bucks.
In that latest write-up I mentioned where I think some of these stocks could get in 2018. That was my most aggressive on a percentage basis target, if that’s what you want to call it, for 2018. So, I like Palo alto a lot here and I’m about to buy some more. It’s long story short. And again, for you tradingWithCody subscribers watching this on YouTube or on The IAm Cody Willard App that’s available in the App Store and the Google Play store, that’s a freebie. How’s that Wayne? Did I answer your question as best I can?
Q. You did. It looks to me as though, from a technical standpoint which I don’t really do that a lot, it’s been enduring a long base here and it’s ready to break out of that base?
A. You know, I love it when the fundamentals and so-called technicals coincide. Although, in both fundamentals and especially on technicals, one man’s base is another man’s ceiling. One man’s head and shoulders is another man’s Gilligan’s Island. I don’t do much (TA) technical analysis as you probably know. And if you don’t, you will realize that I might every once in a while say, you know, it looks sort of like this thing is putting in a basin and could break out or something like that, but it’s not my specialty. And frankly, I don’t think that over the long term the universe rewards drawing lines on stock charts. Any other questions while you got me here Wayne?
Wayne, while you’re here, do you have another question?
Q. Not really. I signed up today and I have a position in Palo Alto Networks and I also have a position in Nvidia, so those are probably be the two that I’m going to be following with you mostly and I’ll be looking for your new recommendations. I’m excited to attack 2018 with you.
Thank you and I’m excited to have you on board. Don’t let the fact that I’ve owned some of these positions even for fifteen years in the case of Apple, sixteen years almost at this point, scare you away. Look at the revolution investment ratings and the highest ones on my latest positions. I’ll nibble on some of them and take an advantage of a swing in the prices or an upcoming catalyst or something. Be sure to be flexible. Don’t just wait for the new pitch is what I’m getting at. There’s value in some of the picks that I’ve owned for years and some of the ones that I just bought recently.
Long time TradingWithCody Subscribers will remember this, I bought some Nvidia back in 2012 and put it in the portfolio back at $12 dollars and we ended up taking profits on it at $18 dollars. I traded it out for another name. Looking back I don’t even know what the other name is. And of course, I ended up being disciplined.
So there’s a good example, by the way. I bought it at $12 and sold it at $18. I then came back to it at $30 as the artificial intelligence and driverless car revolution really got in front of Nvidia and it became a good-looking potential pure-play on those, and so we bought it again at $30 and we still own it. We did trim some recently when it was above $200 as it is again today.
By the way, did you know that today is Bitcoin’s birthday? The first ever Bitcoins were mined eight years ago on the 3rd of January, 2009. That tidbit from our chat room, courtesy of Speculinas or as I like to call him, Spec. He’s my Lithuanian based research associate, and chat room moderator. So, here’s a question.
Q. Cody, did the recent report today on the design flaw at Intel change your thesis?
A. Long story short on this too. There’s a report, and I can’t think of the name of the company that wrote it off of the top of my head- The Register maybe, and it talks about the fact that the Intel chips apparently have a security flaw. The patch degrades the performance of them by five to thirty percent. So, Intel got hit by five percent stock today. Not coincidentally enough, but perhaps coincidentally enough. And meanwhile, AMD is up ten percent plus and Nvidia as I mentioned earlier, which I do own, is up seven percent.
Now, I bought Intel several months ago around $35. I think the internet of things is a big thing for it in 2018 and I think it’s cheap with good dividends and has been left for dead. I think it could play catch up with some of the other major cap techs. Now, did this report change anything? No. This doesn’t change my thesis at all, even if over the next three months, or something, it takes Intel some time to re-jigger and recalibrate their chips to compensate and resolve this issue. I think the stock market might be overreacting.
You’ll notice a theme in the market right now. It’s near-term bullish, probably mid-term and even potentially long-term bearish. And that theme is this, maniacal moves. Bitcoin stocks and marijuana penny stocks start changing their names to Bitcoin Marijuana, then the stock goes up a thousand percent. That’s not a normal thing. Also, Nvidia and AMD making a move like ten percent and seven percent and Intel being down five percent off of a report like that, those are pretty aggressive moves by the market. Lot of times when mid-term tops are being put on there’s volatility like that and craziness going on. So, it’s just another something you should be aware of and don’t be crazy bullish right now loading up on calls.
Q. Does that design flaw make AMD more attractive?
A. No. Look, I don’t plan on ever owning AMD. I don’t like the management there. I never owned it. Maybe I owned it at one point in years past or something, but maybe that’s why I don’t like the management. I just feel like number one, it’s their balance sheet, the management has bought back their stock at highs and then borrows money at lows. They’ve just done a terrible job of managing their balance sheets. And that alone, I just don’t know that I’ll ever buy AMD. I’m never going to be your AMD bull. Never say never, though. I’ll always be opportunistic.
Yesterday I mentioned one of my economic and stock market themes was that there should be some marijuana related stocks coming public in 2018. In the chat room someone was asking me if I had some and I said, “Look, I’m still waiting for some of those. Do you guys know of any that I’ve missed?” And then, a bunch of penny stock crap from mostly new subscribers who don’t know that most penny stocks, especially marijuana related penny stocks and most blockchain penny stocks, are scams. So, no! CBIS is not a stock that I would ever buy, It looks like a scam if I were to bet. I’ve written that in public before and never heard back from them.
Q. Thoughts on (CWH) Camping World Holdings as a potential long? There’s solid growth that appears to be Amazon proof with strong management and with a reasonable valuation.
A. That’s an interesting question. So, the question is about (CWH) Camping World Holdings and he says that the company has strong growth and it’s Amazon proof because the assumption there is that you’re not going to be buying RVs off of Amazon. I think that’s probably, at least for several years, a safe assumption. I could see Amazon in fifteen years taking their distribution facilities and/or buying some parking lot company and turning out Amazon Camping World, but for the foreseeable future I agree with you. It seems for the next five or ten or fifteen years, Camping World RVs would be a Amazon proof retail business and strong management with a reasonable valuation.
Let me look up the valuation while I’m answering the question. I actually do know a little bit about Camping World because as most of you guys know I have a medically fragile daughter and we bought an RV a couple of years ago after she was born and made it medically equipped so we can take her back and forth 160 miles to the hospital in Albuquerque. When we were shopping for those, me being a stock market hedge fund guy thought, what’s the deal with Camping World and who owns this? As I recall, it owns most of the major Camping World related type names. Most RV retail chains are owned by Camping World.
Let’s just check the valuation here. It has a $4 billion dollar market cap. It’s supposed to earn two hundred fifty next year. The stocks at $45 bucks. So, growth rate this year was nineteen percent in 2017. And in 2018, it’s expected to be about fourteen percent. They’re reasonable valuations. I wouldn’t call them great. The growth rate is strong for a retail company, but it’s very cyclical. Let’s keep it real. The RV business is very cyclical. In good times people buy RVs, and in bad times and recessions it takes a hit. It’s not exactly a revolutionary investing theme or something like that and the valuation doesn’t terribly excite me.
Let’s look and see what the chart looks like for the last one year or so. Well, it was probably a pretty good valuation back there at twenty-six where it was early last summer, that’s ten times next year’s earnings. At forty-six, not so much. That’s not one I’m terribly thrilled about is the answer to that question. Anybody on the call and/or on the app that would like to ask a question? I’m going back to the chat room.
Q. Any thoughts on stamps.com?
A. You know, it’s funny, I haven’t thought about that in a long time. Long time real money people will remember when Jim Cramer and Todd Harrison were together, and that it was the Red Hots or the Red Hot Pokers or Red Hot Internets back in like 1999-2000 before I was ever at The Street. I joined in 2001. Anyway, stamps.com was sort of like a Bitcoin stock of today would be. I mean, this was a name that was just supposed to take over the stamps world and the post office and revolutionize how you send packages. Looking at a max chart, back in 1998-1999, it went from $3 to $157 and by 2002 it was back at $5. They probably had $5 net cash on their balance sheet back then, meaning that the market was basically saying that the company was going to be worthless.
Fast forward to today. It’s actually at $189 after nineteen years. Two decades later the valuation was back to where it was and back in at the top of the bubble. I’m not saying today’s the top of the Bitcoin bubble, but it is now getting closer to a top of a Bitcoin bubble and this comes from someone who bought Bitcoin back at $100 and turned bearish and started calling it a bubble back at around $2,800. I don’t know if this is the top and I didn’t say it was the top back at $2,800 either. It could easily go to $100,000 before it tops, but I do think that most Bitcoin related stocks will probably crash at some point, especially these micro caps. Those are scams, most of them. But like stamps.com, even the good ones can take decades to get back to where they are.
Stamps.com, just looking at it these days, is supposed to earn on an average estimate eight hundred thirty-three, which would be down from this year’s nine hundred forty-one. It must just be an accounting thing. So, let’s just throw a $10 dollar multiple at it. It’s at eighteen times earnings not accounting for the balance sheet. This year it’s a groove twenty-five percent top-line and next year it’s supposed to do fifteen percent top-line. It sounds sort of like the one we just looked at- Camping World.
The valuation doesn’t excite me. The revolution in the technology side of it doesn’t excite me. The growth rate is supposed to slow at eighteen times next year’s earnings when the markets have already done what they’ve done and that doesn’t do much for me. Any other questions on the call?
Q. Where are you right now on AMBA?
A. I sold it. Did you get the trade alert last week? I sold AMBA and one other name that same day. Just like I said, I’m reducing the number of positions. We’ve had more than a double in Ambarella and we took some profits even when it was a quadruple at one point. We held on to some of it there and I think it was just time to move on from it. At least for now. I will revisit it in a month. The company has had some stumbles over the years.
Q. I am a new subscriber with a fair amount of experience. I like the long term focus. Just wondering if you are considering any marijuana related companies in your portfolio. I know Todd Harrison considers this space a huge growth opportunity over the next 10 years. Would appreciate your thoughts
A. Thanks for joining. I do think marijuana is a growth industry and I do want to get some exposure to it. I haven’t found a stock I’m comfortable with yet though
Alright guys, I’m going to wrap it up there. If I did miss your questions today I apologize, but I’m going to sign out. Peace, love and happiness. Go to tradingwithcody.com. Check me out at CES if you’re there. I’ll talk to you guys soon.