• Skip to content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer

Trading With Cody

Long-term Revolution Investments and Real-time Trades from Cody Willard


  • Twitter

  • YouTube

  • iTunes Podcasts

  • SoundCloud
  • Trade Alerts
  • Latest Positions
  • All Archives
  • Chat Room
  • Books
  • About/FAQ/More Info
    • Testimonials
    • FAQ
    • Contact
    • Privacy Policy
    • Support
    • Money management services
    • Public Speaking
    • Cancellation Policy
    • Login

Trade Alert: Ugh, WDC

November 1, 2018 by Cody Willard 1 Comment

I need to let you know what I’m going to do with our loser, WDC.

Long story short, I feel completely misled by management there and I am astonished at how badly they’ve mismanaged things in just the last 90 days.

You guys know I’m a long-term kind of investor. The reason I bought WDC is because they are now part of a flash storage oligopoly while I think there is about to be a multi-year secular growth cycle in demand for NAND storage driven by driverless cars, robotics, IoT, Cloud and so on. And WDC bought Sandisk which was the leader in flash and owns a bunch of flash patents. But here’s the first part of where I’m so disappointed in WDC’s management. WDC has been highlighting how they’re going to be big in cloud flash and that margins in enterprise flash storage would be industry-leading even in a down cycle of pricing like we’re seeing here.

But the quarter they just reported was only industry-leading on the downside for margins and profitability. The company’s disk storage business is going to be increasingly worthless in years ahead but it’s supposed to be flash that’s going to drive the future. But the company now admits that they’ve fallen behind in flash storage technology just as Micron and others are putting flash and DRAM into the same chips and driving a future that’s was supposed to belong to WDC. Management had a reputation as excellent operator, but that was hdd only. Clearly they aren’t as good with memory semi/systems.

Meanwhile, and here’s what truly blows my mind — the company spent a billion dollars buying its own stock back, mostly in the $80s where you and I were buying it. But you and I didn’t know what WDC management clearly had to have known — that the quarter was going to be terrible and their margins are declining faster than the rest of the industry. WDC has had a multi-billion dollar buyback program in place for years but they’ve never actually bought much stock back until this last 90 days? Right into this horrible quarter? And instead of having just sent us investor that money in a dividend or having spent that money buying up every leading flash storage start-up on the planet, WDC just lost $500 million (they spent $1 billion buying back stock in the $80s and the stock is now in the $40s) at the Wall Street casino when they, of all people should have known the quarter was going to be terrible.

So the stock is wildly cheap right now on a lot of metrics including at about 6x next year’s earnings estimates, but we have to question if next year’s earnings estimates are even attainable if the company has fallen behind its competitors.

One of the most important rules in investing is to only put your money behind management your believe in. Another most important rule in investing is to cut your losses and ride your winners. We have so many big winners that we’ve ridden over the years and we have done a good job of culling our losers along the way too. I’m going to grudgingly sell my WDC and move on from this name for now. I reserve the right, as always, to revisit it later. But I can’t fathom a worse 90 days of execution by any tech management out there. And I want to run with winners and this one’s been nothing but a loser for us.

I’m selling all of my WDC and taking the losses and moving on.

Ugh.

 

 

Related posts:

Let's talk about some important trading strategies that I'm employing right now...
Predictions for the markets, cryptocurrencies, earnings and lots of stocks
Feet to fire- where the markets are headed over the next five years
Investor's thought of the day
Remain Cautious As The Great Bubble Unwind Continues
  • Twitter
  • YouTube
  • iTunes Podcasts
  • SoundCloud

Filed Under: Trading

Disclosure: At the time of publication, the firm in which Willard is a partner and/or Mr. Willard had positions in some of the stocks mentioned above although positions can change at any time and without notice.

Reader Interactions

Comments

  1. carl tropper says

    November 1, 2018 at 4:03 pm

    @cody How does one know how to trust management if you don’t have some sort of relationship with them?

    Log in to Reply

Leave a Reply Cancel reply

You must be logged in to post a comment.

Primary Sidebar

Must Read Articles (Free)

How To Invest In Business Models From Outer Space
Everything You Need To Know About Cryptocurrencies

You are not currently logged in.








» Register
» Lost your Password?

Subscribe now. You can cancel at anytime.

Buy with Crypto

Footer

This does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or cryptocurrency or token any other product or service by Cody Willard or any other third party. Furthermore, nothing in this is intended to provide tax, legal, or investment advice and nothing in this should be construed as a recommendation to buy, sell, or hold any investment or security or cryptocurrency or token or to engage in any investment strategy or transaction. You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your business advisor, attorney, or tax and accounting advisor regarding your specific business, legal or tax situation.

Copyright © 2022 · Magazine Pro on Genesis Framework · WordPress · Log in