Here’s the transcript from this week’s Live Q&A Chat.
Q. We’ve been quite optimistic in May buying some May call options on favourite stocks, as you recommended. Now it is upside down and one of the worst May’s in years. Any comments? Sell in May and go away?
A. I think about those questions every day. I added some hedges today, not really because of “Sell in May and Go Away” but more because of the still escalating Trade Wars.
Q. Saw this tweet on TSLA – Interestingly, on Friday $TSLA hit its 100 month moving average, roughly the same place that $AMZN hit before beginning its eight year climb from 35 to 2000. Perhaps the HFTs and algorithms that dominate trading these days will take note.
A. Interesting theory, however, I don’t think the high-frequency trading and algorithms (which are mostly also quite short-term though not always millisecond-term), are using 100-month moving averages nor do they care if a stock might go up 20-fold. By definition, really.
Q. For those that have purchased TSLA in IRA and 401K plans and don’t have the luxury of buying puts to protect, any suggestions or would you at this point say without a hedge…too risky to be in stock?
Q. Hi Cody, I can’t make the chat today. I do have a question: for those of us who no longer dabble in options (too volatile and lost too much on them over the years), how would you “hedge” TSLA? Sell some at these levels?
Q. The TSLA puts you mentioned today are too expensive for my (small) portfolio to make sense. In that case, what do you recommend for a hedge? Just cash?
A. Unfortunately, the lack of ability to buy puts in an IRA means that your means of hedging an individual stock like TSLA is limited. Perhaps the best solution, as usual, would mean cutting back exposure in the name. You can think of TSLA as a venture capital-type situation and know that if it works you, there’s potential 10x returns but if it doesn’t, it could go to $0.
Q. Cody – Has the current situation and negative news on TSLA dampened your expectations on TSLA a bit?
A. Not really but I think it’s important to hedge it. See the Trade Alert I sent out about it this morning please.
Q. Cody. Good morning. Hope you had a nice restful holiday weekend. Thoughts on SQ after another consolidation in the payment processing market? Does this bode well for square going forward?
A. Thanks for the kind words. The fast growth and opportunities in the payment processing market are immense and global. And we’ll likely see more consolidation of the many startups and competitors vying for space. All that is a good underpinning for SQ but more important is whether the company can deliver billions of dollars of earnings in coming years.
Q. Cody, For income what do you think of ET? Over 8% with portion return of capital lowers basis. Strong cash flow.
A. With an eye-popping $43 billion in debt I would wonder why the company hasn’t already stopped paying a dividend to try to build up the balance sheet for a few years. I’m not much of a fan of energy companies, of course, on account of them being such a cyclical business overlaid on secularly declining industry.
Q. Cody – Any thoughts on time frame for BIDU bounce back?
A. It could be today, it could be in a month, it could be never. BIDU’s cheap in a lot of ways, but the core search business isn’t immune to competition and the fact that it’s a Chinese-based company comes with all that added risk (much of which I think is now priced in here where we’ve started nibbling on it with the stock down 60% plus from its highs).
Q. In one of the previous chats we discussed about shorting some in transportation and logistics sector. Cody, where do you stand on this? Any names?
A. Still working on it. I’ll likely add some shorts in the sector and will let you know.
Q. Cody, do you consider DIS to be a revolutionary stock? They seem really focused on becoming a NFLX rival with video streaming, yet have a comparatively low multiple. They have ESPN+, plan to launch Disney+ in November, and now fully control Hulu. They’re projected (so, priced in?) to have high dollar releases with the Avengers, Lion King, and Stars Wars. Robert Iger has been an amazing CEO, but is set to retire in ~2 years. He’s gotten high ROI on Pixar, Star Wars, Marvel. But like streaming rivals AT&T and Comcast, Disney carries a lot of debt because of its content acquisitions.
A. Iger’s successor will likely be the reason the company becomes/stays Revolutionary or not. I have a hard time chasing a name like this with a chart that’s so extended. I don’t own it but if I did I’d probably try to pretty much hold onto it forever, I suppose.
Q. Any feelings of PANW before earnings? Strong last quarter, but now quiet week, is there anything bad brewing for that one?
A. Morgan Stanley or somebody did a report recently that said their “channel checks” and what not were indicating that PANW might miss their quarter. Earnings are tomorrow after the close, so we’ll soon find out more. I think this is a great company in a must-own sector that actually benefits from escalating Chinese/Russian/US tensions and hackings that I have a pretty big position in it and might even add more if it gets hit hard after the report.
Q. INTC is below our buying prices last year but AMD is rising. What do you recommend?
A. I sent out a Trade Alert a while ago about selling INTC. I’d recommend doing neither buy nor sell with either of the two stocks.
Q. Any thoughts on MO??
A. I still like the now 6.4% dividend and the long-term concept of MO being a e-cannabis consumer play, but the stock’s down about 10% and has been painful thus far. I am sitting tight with it for now.
Q. Any thoughts on TTD? Expensive but strong growth in what will probably be growing industry.
A. I just can’t get my arms around its valuation but if it ever got crushed along with the broader markets while maintaining its strength, I’d probably buy some.
Q. Any thoughts on what could knock SHOP down?
A. Four things, at least: 1) Valuation is very high and could come down 30% and still not be “cheap.” 2) A broader market sell-off. 3) If the company misses a quarter or has to guide lower for some reason. 4) Sentiment being too bullish around the name, driving people to ask questions such as “any thoughts on what could ever knock SHOP down?” Hehe.
Q. Can you comment on why you have sold your COMM position? Is it a terrible investment? I am still holding shares I had and would appreciate you opinion whether I still should hold it for couple quarters as you originally wanted planned. Thank you!
A. I just wanted to find some other kinds of names besides a second-tier company integrating a recent acquisition. It’s not a terrible company, but I find better risk/reward scenarios elsewhere.
Q. Cody, If I recall, you liked TWLO… at what price would you be a buyer?
A. Yes. Maybe $120ish?
Q. Do you have any thoughts on the crypto, Monero (XMR)? It seems that people are (very) slowly waking up to the fact that Bitcoin isn’t anonymous, while Monero is all about privacy. I believe that privacy will become more valuable as the years go by and if there’s a play that might benefit, Monero would be at the top of the list.
A. Haven’t done much work on Monero, but it’s a coolero namero and I willero check it outero.
Q. Do you anticipate VZ will benefit from being immune from trading war dislocations and treasury yield drifting lower?
A. Not sure the Trade War or Treasuries will be the driver for VZ stock. VZ will likely pop if the TMUS/S merger gets approved and then it will come down to how well 5G plays out for VZ in coming years.