Here’s the transcript from this week’s TradingWithCody Q&A Chat. I also want to make sure you saw yesterday’s Trade Alert about getting started in two new names by buying small tranches of CALX and WDC as some of you reported not having gotten the email for some reason.
Q. You’ve written about more downside in crypto (and how you’ve owned coins for years)… at what prices should we begin to look at Bitcoin again?
A. I might start buying some Bitcoin again below $5000 or maybe closer to $1500. I’m in no rush. That said, if someone wants to own some bitcoin and/or just learn how to do it now so you’re prepared, maybe buy a tiny TINY bit now to get your feet wet.
Q. Where and how do you buy Bitcoin? Do you recommend a broker where they will hold your bitcoins? Thanks.
A. Read my book The Bitcoin Revolution and The Great Cryptocurrency Crash before you buy bitcoins. You can buy them at coinbase.com, but I can’t vouch for coinbase or any other broker. I lost bitcoins in the mt.gox debacle years ago for example.
Q. I think we have gone from “who is more scared?” to “do bears exist”? Anyone who has started investing in stocks in the last 395 days has not experienced a 5% correction….
A. Those are both terrific points. A 5% correction is coming….sooner or later, of course. I’ve nibbled IWM puts a couple times in the last few months to try to hedge and I will probably buy some IWM and SPY puts and even add another short position to the portfolio at some point in the next few weeks if the markets keep climbing — and I’ll probably trim a little bit of some of our names and maybe sell one more long entirely, etc etc.
We follow the playbook, and the playbook still says to stay mostly net long and keep on Revolution Investing…for now. I constantly look for signs of this ongoing Bubble Blowing Bull Market that we have been positioned for for the last seven years or so, and I want to make sure we darn near catch the top like we did in 2007 when I closed my hedge fund years ago right before the markets crashed into the 2008 financial crisis.
Q. So much talk about a 5%+ correction being long overdue for the markets. Crazy part is, a 5% correction at this time would simply take the markets back to where they were a little over a week ago. This run-up over the past year, especially the record-setting run over the past 3 weeks, has truly been phenomenal.
A. Great points again and I agree the endless rally in the markets for the past 400 days and the record-setting run of the past 3 weeks have both been phenoms. We should do a poll asking who’s more scared right now, the bulls or the bears? You know it’s got to be nearly unanimous that the bears are the ones who are scared right now. Does that mean the markets are due for a 3-5% correction and/or a more severe tanking? Nope. In fact, I’m wondering if the markets might trade sideways for the next two or three months, going up 2-3% and then down 2-3% in swinging action, frustrating both the bulls and what’s left of the bears.
Q. Good morning , Cody. Well, of course, thanks for the two new alerts. Somehow it feels like people were hungrier for these than usual! One of my questions today has to do with the “weakness” of the dollar– one of the Trump guys this morning said they believe a weak dollar is good for the USA. Not sure whether that’s CYA or economic wisdom — but assuming it continues to slide . . . do you have any thoughts on financial stocks (or hedges) to look at? And in which direction?
A. I want to make a point about your first comment that it seems like my Trading With Cody subscribers were hungrier for new names to buy than usual. I sense that too, and that’s probably bearish in a contrarian sense. People aren’t hungry for new names to buy when the stock market is putting in a bottom, let’s put it that way.
To your second question about the dollar. I’ve addressed this many times over the years, whenever I write about the dollar. The following quotes are from an article I wrote 3 years ago this week called “Playbook for currency wars more important than ever“. Note that I mention Bitcoin as an beneficiary of these fiat currency wars — at the time bitcoin was trading just $200!
Anyway here’s my take on the dollar and how to play it (or not play it!):
“Governments of developed and developing countries have been manipulating their fiat currencies for my whole lifetime, mostly all trying to devalue their currencies relative to the other fiat currencies, and I don’t expect it to stop any time soon. The entire Swiss GDP is about $650 billion, about equal to the market cap of Apple.
So it’s not like the Swiss Franc is ever going to replace the US Dollar as the world’s reserve currency. Most currency war outcomes still favor the US Dollar for the next few years, and I still think after we get some temporary fear built into the stock markets from these currency dislocations, we’re likely right back into the Bubble Blowing Bull Market we’ve been successfully riding for the last five or six years.
One last thought — all this analysis of government fiat currency wars underscores why some folks believe Bitcoin is a long-term game changer. $BTC up 22% today, which is, well, just a little bit more than the Swiss Franc. All this once again underscores why we focus on finding companies that are truly revolutionizing industries and changing the world rather than trying to game un-game-able currency markets and government manipulations.”
Q. Relating to SPY vs. IWM puts. Any comments on which you’d favor right now (SPY, “protection” on the S&P 500) vs. IWM (ditto on small caps)? And can you throw out a time frame and strike price if you were jumping in today? And finally, since the TWC portfolio is obviously loaded toward hi-tech (and thank you for that) — is there a quality way to hedge that sector more exclusively (beyond selected shorts)?
A. If I were to buy some put hedges today, I’d probably look at puts 1-2% below the current trading price for IWM and/or SPY that expire in March. But I’m NOT doing that trade. I repeat, I’m not buying puts today.
Anyway, if you wanted a way to hedge that’s more tech-centric, look at the QQQ, which is made up 45% of AAPL, MSFT, AMZN, FB, and GOOG. (PS. We’ve owned AAPL, AMZN, FB and GOOG years before they made up even a tiny fraction of the QQQ, as we’ve ridden them up for these huge gains over the years of course.)
Q. Will 5G be a boondoggle for $VZ? 100x faster?
A. Yes. Here’s part of what I wrote when I bought VZ a few weeks ago: “In all my years as a technology and telecom and communications investor, I’ve never been a big fan of the major telcos — AT&T, Verizon, Cingular, SBC, Sprint, Worldcom, etc. There’s been a lot of reasons for my reticence in buying these old telcos, including each of them having had too much debt, too much competition, and the fact that most of their legacy business was built on old telecom technologies that Internet Protocol technologies have replaced over the last fifteen years.
But we’re here now, about to see the 5G Revolution hit. There is so much pent up demand for better wireless connectivity with much higher bandwidth that whoever delivers on the best and earlier roll out of 5G is likely to be squash all competitors and become a huge winner for many years to come.
You all have heard me lament the lack of bandwidth when I’m live streaming on my app lately and I heard Neil Patrick Harris say the same thing on his live stream the other day — “When will these wireless providers get me the speed I need?” The answer is those higher speeds are coming over the next year. Verizon has spent tens of billions of dollars expanding their backbone, buying wireless spectrum to run 5G and otherwise preparing to bet their company on 5G dominance.”
Q. Does Verizon have any serious competition in 5G? When can we expect Verizon to start deploying the networks and start to make money?
A. Every wireless carrier and a few other companies will deploy 5G in coming years, so there’s plenty of coming competition to VZ in 5G. But Verizon’s invested much more than any other carrier or anybody else in the US so far and they will probably have a good 1-2 year lead on 5G for the next decade. Verizon’s already deploying some 5G in major US cities. 5G will generate additional billions of dollars in revenue in the next decade for Verizon and other carriers, I would expect.
Q. What are your thoughts on so-called Agritech companies? I’ve been watching AgroFresh (AGFS) for a while now and recently bought a tranch. They make products that manipulate ethylene gas to either increase or decrease ripening to suit the customer’s purpose.
A. I like any-sector-tech, including Agritech. I don’t know AGFS but just looked them up. A $7 small cap stock with a market cap under $400 million. The company is going to do $180 million in sales this year, so that probably means they’ve got a real business at least. Only one analyst is covering the stock. Looking at their cash flow statement raises some red flags as there’s a lot of adjustments being made in those numbers every year.
I’d have to talk to the management and learn much more about the company to get involved in this kind of a smaller cap stock (Remember how I got to know Axogen’s management/CEO and spoke to customers (hand surgeons) when I bought the stock at $4 when its market cap was under $200 million market cap — the market cap broke $1 billion a few weeks ago when the stock hit $31 before pulling back). But those red flags in the cash flow statement make AGFS a non-starter for me for now.
Q. Cody, two biospecs. NVAX and CGEN. Have asked some time ago, you said you will look at them. Could be I haven’t noticed your answer. Thank you!
A. Here’s the description of NVAX, a $2 penny stock with a $600 million market cap that did $20 something million in sales last year:
“Novavax, Inc., a clinical-stage biotechnology company, focuses on the discovery, development, and commercialization of recombinant nanoparticle vaccines and adjuvants. The company develops respiratory syncytial virus fusion protein nanoparticle vaccine candidate for infants via maternal immunization in Phase III development stage; older adults in Phase II development stage; and children six months to five years of age in Phase I development stage. It also develops Ebola GP vaccine in Phase 1 clinical trial; preclinical programs for Zika virus; and seasonal influenza and a combination respiratory vaccine candidate, as well as other infectious disease vaccine candidates.”
Now I have friends who run biotech-related hedge funds and who spend their lives getting doctorate degrees in biology and medical degrees and then spend the rest of their lives studying these kinds of clinical stage biotech companies. And some lose their butts on this stuff anyway.
Now sometimes it’s good to just know what you don’t know, and I don’t know anything about Zika or Ebola except that they are terrible diseases and I hope somebody creates technology to eradicate them. But I’ve no idea if this or any other company is on the right track. In other words, I have no edge here. Sorry.
Q. Intel bought mobileye because it wanted to get into autonomous cars. Does Intel have any other major initiatives in AI, e.g. does it have a “deep learning chip”. If so, who would they market the chip to?
A. I mentioned last week, “I had a great tour of their booth at CES when the blackout hit. Bobby Farrelly (director of Something About Mary and Dumb and Dumber), along with my partners and myself, were having a tour from Intel on all of their latest technologies. While they were literally showing us their 5G technologies, and how resilient their network from end to end and from internet of things to the cloud itself and how it’s so resilient and that they have redundancies built in throughout, when all of a sudden everything starts turning black. CES had a complete blackout. Turns out, you need electricity to run anything.
What was also really fascinating, as soon as that happened, we were up on a stage and I had a moment of nervousness and was worried that a massive crowd or rush might be running by. We were up on a platform looking down on the crowd at that moment. It was totally cool and nothing happened. There wasn’t any panic. We walked down the platform a few minutes later with some of the Intel people and a woman started pulling out and playing a violin. You might have seen it on the news. We were standing there and Bobby turns to me and says, “Sort of like the Titanic.” We all laughed.
Intel also had a couple prototypes of their new quantum chip and a prototype of their latest artificial intelligence chip. When the electricity went out there were security guards immediately with lights and tasers around those chips. With the security guards standing there, the guy told us all about it. He showed us the chips and told us what they’re doing and where they’re headed. A lot of incredible stuff happening at Intel.
But to the point, internet of things going to be generating a lot of revenue growth over the next few years. The cloud itself, probably stable or slightly down. The driverless car, driverless initiatives probably going to be generating some significant revenue for Intel over the next three to five years. Intel’s not going anywhere. It’s got a great dividend.”
Q. Would On Semiconductor $ON be worth considering on a pullback as a play on autonomous vehicles?
A. I remember when ON’s symbol was ONNN and the stock was trading at $24 per share back in the year 2000. I also remember it trading in the single digits for the next fifteen years before finally catching a big rally back to $24 where it trades currently at its highest level since the year 2000. The company has grown revenues from hundreds of millions of dollars back in 2000 to $5 billion this year, which was up nearly 40% over last year. I’m not sure how big autonomous vehicles are as an opportunity for $ON, but I’ll take a fresh look at it in coming weeks. Thanks.
Q. Hey Cody, Thanks for all your hard work. Can you give your latest opinions on Lam Research (lrcx), KLA-Tencor (klac). Best Regards.
A. Ah, man thanks for the kind words. You know what though, I feel like an idiot when it comes to the semiconductor cap plays like KLAC, and LRCX and especially AMAT — because as long time Trading With Cody subscribers know, I bought AMAT back at $13 a few years ago and sold it at like $17 because I lost faith in it. With that said, I like the semi cap plays here because the semi’s keep spending and the demand for much of the semiconductors is secular growth in nature, as I’ve been discussion lately.
Q. Cody – Thanks for the trade alerts. I am just curious why you picked WDC over Micron. It seems Micron is extremely undervalued and has potential to double from here. There is huge option activity and seems like MM’s have successfully collected premiums by keeping this under $43 – most of options have expired worthless. Would love to understand your analysis and thought process behind MU. Thanks for your great analysis over years!
A. I just feel like the risk/reward on WDC is sweet right here. I might end up buying MU at some point too.