Here’s the transcript from this week’s Live Q&A Chat.
Q. Thanks for the news letter that just came out. I cannot get my head around how negative interest rate works in Europe. Normally Banks payout small interest to depositors and then lends the same money to others at an higher interest. With negative interest are we saying the banks cannot lend money out? Has this negative interest ever happened in the prior history on mankind. It sould like an oxymoron that consumers would loan the money to the bank and instead of getting some penny return they pay the bank?
A. Banks can and will still lend money out and positive interest rates, even if they are also being paid to hold money via negative interest rates. It’s the governments of Germany, Japan and elsewhere that are issuing trillions of dollars worth of bonds that literally come with negative interest rates that theoretically benefit the most from the negative interest rates. But anytime governments and central banks meddle with natural forces like interest rates, there are all kinds of unintended (or at least not the intentions sold to the public) consequences. And one of the biggest consequences of negative interest rates around the developed world while the US keeps its rates at somewhat positive levels is that trillions of dollars are trying to get to the US. TLDR (too long don’t read) version: Negative interest rates are INSANE but probably good for US stocks for now.
Q. Any thoughts on BA? Anyone out there nibbling on BA? I have a small position that’s basically break-even. I flip-flop between selling all of it and moving on from this FAA/Boeing battle and nibbling a little. I’d sell and hold the cash or move it to TWTR, WORK, something else. AND I have BA. Half bought at 120, the other half around 250. I asked my financial guy today if we should cut ties. He basically said he isn’t selling. He said 10 years from now it will still be just Boeing and Airbus. Frustrating to see but if you are investing long term, I think this presents a good opportunity. AND Regarding BA, the crash report findings do say there was pilot error, but a very big finger is being pointed at Boeing for designing a flight control system that malfunctioned with a single source input failure. I see $BA becoming a hated stock in the next 3 months. Planning to build a stronger position then. Just saw that Cramer expects BA to get down to $300. I was thinking the same, not that I have any special insight. Just my gut. AND Hi Cody, i hope al is well. Is it time to nibble a littel bit of Boeing? Or is it better to wait for now? AND Hi Cody. Thoughts on $BA 737 Max production pause?
A. Remember when Apple warned about earnings back on like the 2nd trading day of this year and the stock, already down in last year’s late year market mini-crash, got killed and traded down to $142? And Cramer was on TV saying something like, “AAPL should be at $120.” I love Cramer, he’s a mentor of mine, a friend, and gave me my first break on TV. But sometimes he can be late and wrong, just like any of us, really. Anyway, AAPL has almost doubled from those levels when all that news. Boeing’s issues are clearly bigger than just a weak 90 days of business like Apple’s issue was at the beginning of the year. The upshot here is that I think BA is a buy again (recall that I’d trimmed some when it was above $370 a few weeks ago). Frankly, I was hoping the stock would be down 3-5% this morning on news that the company is halting producing of the Max in January. Consider this a Trade Alert: I’m nibbling a small tranche of BA here $321. I’d probably do a bigger, more aggressive tranche buy if it drops below $300.
Q. What’s your opinion on CHWY?
A. I can hardly believe this online pet food company is public… I mean, Pets.com, anybody? PETS was once worth billions, back in the year 2000 when their sock dog puppet was a cute commercial. It went to $0. I don’t think CHWY is going to $0 but I wouldn’t want to own the stock. The company is not profitable and isn’t going to be for another year or two at least. It’s a low gross margin business and while the topline growth rate of 30%ish is impressive, I don’t think the stock sounds very Revolutionary. With an $11 billion market cap here, CHWY is trading at nearly 2x next year’s sales estimates and has about the same market cap as Slack (WORK, worst ticker ever). I’d rather bet on WORK for the next decade than CHWY.
Q. Everywhere I look someone is recommending SQ as an undervalued strong buy…should this worry us?
A. Haha, in a contrarian sense, absolutely it should scare us. Longer-term, if Square keeps growing and creating new high margin profit streams, the stock should be fine regardless.
Q. Any thoughts on TME?
A. I’d rather just own TenCent TCEHY than TME.
Q. Hey Cody, any thoughts on PYPL?
A. I’m not a big fan of Paypal, but if their Venmo service can keep its positioning as a leader in digital payments, the stock probably has more upside. Trading at 30x next year’s EPS estimates and growing topline at 15% per year, the stock is probably about fairly valued here. I’d rather own SQ than PYPL.
Q. Cody. ARK INVEST had an article about SPCE could be a better hypersonic long haul private jet service instead of space tourist service. . Said that the industrial could be an over 250b market. What is your take on that?
A. Yes, it’s certainly possible that Virgin Galactic figures out some new uses/revenue streams from the technologies they’re developing to make space tourism possible. That’s part of why we’ve bet on them early on here even with out being able to fully see all the possibilities. Here’s an article someone tweeted to me with similarly optimistic ideas for SpaceX, by the way.
Q. I’m thinking NVDA is in for a correction – do you ever buy puts on a held position in lieu of simply trimming?
A. Sometimes, yes. I’ve been doing that with AAPL lately for example.
Q. Cody welcome back from your trip and thanks for sharing all your observations DIS how much of a full position do u have presently? At what price points would you like to go all in given your thesis for years to come?
A. I have close to a full-ish position in DIS. I’d probably get very aggressive about buying DIS if it got back down below $130.
Q. Hey Cody, You haven’t talked a lot about 5g for some time outside of TMUS and QCOM. I don’t know if you noticed but UI a stock you had for a while took off, Keys has been pretty good and VIAV has been ok. Any interest in any of those stocks or this area again?
A. QCOM is by far my favorite 5G play. CSCO is a good 5G play too, because all the traffic will need routers to guide it. Not so interested in the smaller plays like VIAV or KEYS or UI.
Q. CSCO latest acquisition seems to be another effort to fortify its position inside four walls – I can’t see any substantive investments they are making in 5G – Am I missing something?
A. It’s the routers. Every 5G network will need so many routers.
Q. Not really revolutionary but thoughts on UTX? 2022 leaps?
Q. Which FANG / FAANNG stocks do you like best right now?
A. TWTR, UBER, TSLA, WORK. Oh, wait, what was the question? FANG stocks? FB is my favorite right now, I suppose.
Q. Cloud stocks are obviously expensive. Any you would buy now or have on your shopping list if/when prices come down?
A. I still like ZEN and MDB, but would want them at a big discount.
Q. Hi Cody: You alerted this morning: “I will be buying a few more small index puts (SPY, QQQ, SMH, IWM), slightly out of the money, dated out to January and February to help hedge the portfolio’s net long positioning…” How far out of the money (specific prices if possible) are you looking to buy for each of these? Will you be adding all of these index puts? Thanks.
A. Maybe 3-5% out of the money. And yes, I plan on nibbling each some puts to help protect the portfolio on each of those indices. But just a tiny bit and just to help protect the portfolio’s longs.
Q. Somewhere I became indoctrinated into thinking against the grain – not sure where that happened???
A. Haha, It usually pays off for investors to go against the grain. No so much for TV anchors! LOL
Q. Bitcoin seems mostly a store of value right now, but do you ever see it as a widely accepted form of payment – or do you believe there’s a chance for another crypto to fill that position? There’s less people accepting Bitcoin than two years ago & there’s less volume on chain than 2 years ago. Currently there are cryptos that are faster, private, etc. Do you see these features being built into Bitcoin in the years to come or could another coin become the actual “currency” of crypto. (Spoiler: Bitcoin, Bitcoin, Bitcoin.)
A. Yes, I think Bitcoin will be used a payments too. Already sort of can be used payments in the Square Cash App, no?
Q. Have you done any work on Tezos $XTZ (now a top 10 crypto) and do you believe that staking-coins could be a new trend over the years to come?
A. “Staking is the process of holding funds in a cryptocurrency wallet to support the operations of a blockchain network. Essentially, it consists of locking cryptocurrencies to receive rewards.” I haven’t done much work on Tezos, but this idea of staking that I posted to start this answer off does NOT sound promising to me. Also: Bitcoin, bitcoin, bitcoin is a better answer. Stick with bitcoin.
Q. Hi Cody, Thank you very much for sharing your investment analysis. They’re the best and I am sincerely grateful to part of TWC. I have question about Bitcoin. Did you hear anything about Bitcoin at SALT? These days I have noticed nobody talks about Bitcoin. It use to be part of every conversation earlier. What are your thoughts about Bitcoin and when do you think it would be a good buying range. Would you ever make Bitcoin significant position in your investment? Thank you once again.
A. Thanks for the kind words! I did talk about bitcoin at SALT and there were several mentions of cryptos and several crypto/bitcoin-related companies there too. I don’t think I’ll make Bitcoin a huge part of my portfolio, but since it was at $100 back in 2013 I’ve suggested in articles in the WSJ and here on Trading With Cody to have maybe 1% of your portfolio in bitcoin. I wouldn’t want too much more in there than that, but I do think a little bitcoin is a good idea.
