Here’s the transcript from this week’s Live Q&A Chat. The most telling thing from the chat was that people are wanting to buy call options and otherwise lacking fear. Be careful out there is my advice, as you’ll see often below.
Q. Any thoughts or market predictions based on the election results tonight? Republicans are supposed to keep the Senate and lose the house.
A. The conventional wisdom is that if the Democrats win the House and/or the Senate, that the markets would tank because they supposedly might revoke Trump’s corporate tax giveaway and/or try to start re-regulating that which the Republicans have lately been de-regulating and/or try to impeach Trump. The #1 rule of the Republican Democrat Regime is to never take anything away from the giant corporations that fund it. So you can forget about that as a concern. The Democrats will at some point propose their own tax package that will also be written by corporate lobbyists and full of new corporate tax giveaways too. If the markets tank near-term off a Democrat sweep, at some point many of our favorite stocks will be good buys. If the markets take off near-term off a Republican sweep, the markets will probably get ahead of themselves and I’ll be looking to selectively short and/or nibble some more index puts. Longer-term, the issues of inflation, tariffs, The Great Trade War of the 21st Century, geopolitical issues and who knows what else are going to matter. But policies from Democrats and Republicans are always pro-corporate profit and pro-Bubble-Blowing Bull Market, so I don’t think I’d make my buy or sell decisions based on trying to game what color Kool-Aid was drank by the most people today.
Q. Cody, is AAPL starting to look good perhaps for buying some calls? Something you have done in the past several times. Or does it need to go down further? Thx Cody.
A. Boy, I think that even wanting to buy call options in Apple after it’s barely fallen 10% from its recent highs is awfully aggressive. And as I’d mentioned in the chat two weeks, the best time to buy (especially call options) is when you can barely stomach doing so. Recall that the times I’ve bought call options on Apple in years past is when the markets and it have been absolutely decimated and almost always when the markets are down like 3-5% on the day when I do it. Be careful with your money!
Q. Hi Cody, I am thinking of buying some call options on our stocks. Which would you recommend to go to ( SNAP?) Any recommendations on call options?
A. Yes, I have recommendations on call options. When two of the ten questions I’ve gotten so far in today’s chat session are asking me about buying call options — I think it’s a terrible time to be buying call options. See my previous answer about why buying call options is usually best done at times when you can’t fathom that it would be a good idea. Hate to use Trading With Cody subscribers as a contrarian indicator, but I just have to point out how bearish it is that people are still looking for quick gains and not being scared about big losses.
Q. You sent out your ‘Where I’d Buy’ list yesterday, but also maintain that you’ll add to puts on a meaningful rise in the markets. Does this mean you believe we’re in more of a range-bound, stock-pickers market now and the bubbles have been blown?
A. Yea, sort of. You guys know that I’ve been saying we could be range-bound after this recent crashish/bounceish market we’ve had. That doesn’t necessarily mean the Bubble-Blowing Bull Market is completely over though. Have to see how the economy, corporate profits and the cycle and the geopolitics and inflation and so on play out. I sure don’t think the set-up is as clearly Bubble- Blowing Bull Market as it has been for the past eight years.
Q. Thought on CALX after earnings? up 14% right now.
A. Like I’ve said all along, CALX is a binary set-up. If they can win real contracts with Verizon and other carriers for the NGPON solutions, the stock can keep going up a bunch from here. But if they don’t win those contracts, this stock could drop in half and eventually go to $0 because they have bet their whole company on these NGPON solutions. Just as important as the earnings last night as the joint press release with Verizon about another successful NGPON test. Frankly, while I haven’t yet read the call transcript I didn’t think the quarter was good enough to pop the stock 20% today but we’ll take it!
Q. Cody, are there any other 5G stocks you might be recommending in the near future? Companies like CALX, but in 5G of course.
A. Calix is actually a 5G play because they enable the fiber optic buildout of the backhaul for the 5G wireless networks. Verizon and the others will simulataneously have to build out the backhaul with the wireless towers as the 5G networks carry so much more bandwidth that has to go into and out of the internet. That said, Verizon remains by far my favorite 5G play.
Q. Cody, Broadcom closed its acquisition of CA today. The stock is trading at 8.8x next year’s earnings estimates. Thoughts?
A. I still think Broadcom is a roll-up disaster waiting to happen. The CA acquisition smells of desperation and I would love to short Broadcom AVGO if the stock would spike near-term. There is no price at which I’d buy Broadcom AVGO.
Q. Cody we have not seen any new stock on your list which is a voice revolution stock.
A. That’s because valuations on most any good (even the not-so-good) Voice Revolution-related stocks were outrageous for most of this year. With the big pullback in October, some of them are closer to the prices I’d be interested in buying them, but they’re not quite there yet(?).
Q. What are thoughts on Sony here?
A. Sony’s not been hit as bad as most tech stocks in the last month and wasn’t trading directly correlated to the US markets anyway (Sony’s based in Japan of course). I do think Sony could get hit hard if currency fluctuations work against the Japanese Yen and I just sort of think Sony could have a hard time rallying near-term right now.
Q. Didn’t see $SNE on the list you sent out yesterday. Accidentally omitted?
A. $SNE is down near the bottom. Row 25.
Subscriber: Got it. Email was clipped and had to expand. Thanks.
Q. Bitcoin. When moon? (Just kidding.)
A. Ah, but you’re not just kidding or you wouldn’t have asked it, methinks. Seriously though, my feet-to-fire guess for bitcoin for the near-term is: I wouldn’t be shocked to see it rally maybe 10% before year-end and then to get all the bitcoin promoters and momo-lovers back into it and then maybe in 2019 it takes its next big leg down in the ongoing Great Cryptocurrency Crash. I still own some Bitcoin because I do believe it will be a valuable currency long-term, but I could be wrong about that. And I could be wrong that it ever crashes further from here too. Careful! (That seems to be a theme lately, huh?)
Q. Do you like AKS Steel?
A. No, I like Revolutionary companies. A $3 steel stock sounds like a terrible idea.
Q. Thought on CALX after earnings? Up 20% right now.
A. Like I’ve said all along, CALX is a binary set-up. If they can win real contracts with Verizon and other carriers for the NGPON solutions, the stock can keep going up a bunch from here. But if they don’t win those contracts, this stock could drop in half and eventually go to $0 because they have bet their whole company on these NGPON solutions. Just as important as the earnings last night as the joint press release with Verizon about another successful NGPON test. Frankly, while I haven’t yet read the call transcript I didn’t think the quarter was good enough to pop the stock 20% today but we’ll take it!
@cody I did, bruddah! I’m not seeing it. I’ll grab a cup of coffee and try looking again.
Q. I noticed in the list you sent out yesterday that you thought SNAP could drop to $6. I bought some at $6.70 and more at $5.90 last week. Should I sell it now and take my profits and buy it back when it gets to $6.50?
A. I don’t think you could successfully manage such a 5% swing nor should you.
Q. Any thoughts on PANW? You always mention that they’re best in class but we haven’t heard a lot about cyberattacks lately. Maybe that’s a bullish sign.
A. Palo Alto is indeed best-in-class for cybersecurity and you’re right that the lack of cyberattack headlines lately is probably bullish. I’m sure cyberattacks are growing exponentially every year and spending on cybersecurity is thusly growing exponentially every year too.
Q. The cybersecurity business is highly-competitive, any concerns about Palo Alto not staying up with the competition?
A. Cybersecurity hasn’t been consolidated into an oligopoly yet, but maybe that’s a bullish thing for the sector. Looking at what IBM paid for Redhat last week shows that they paid 60x next year’s earnings estimates and 10x this year’s revenue estimates for a 15% topline grower. By comparison, PANW is trading at 30x next year’s earnings estimates and 6x this year’s revenue estimates for a 20% topline grower.
