Chat Transcript: GLW, NFLX, BRCM, LPS, and lessons from Baseball
Here’s the transcript of today’s chat. We broke the questions and answers down into two sections as usual — Economy/markets/trading/strategy and Stocks. See you next week at 2pm EST at http://tradingwithcody.com/chat for more Q&A where you can ask me anything.
Economy/markets/trading/strategy
Q: Hi Cody, what are your thoughts on the potential outcome of the Summit today?
A: Did you see my post yesterday detailing my thoughts on the Summit and the endless EU bank bailouts? Upshot is that I don’t think there’s anything that the EUcrats can do except further kick the can down the road. If they pull that off and the market decides that it’s still backstopped by taxpayers, then we’ll have a big near-term rally. If not, the markets will likely get hit near-term. I’ve raised a bunch of cash of late because I expect the latter is more likely at this point.
Q: Cody, good afternoon–any recommendations for short term pitches? Appreciate it.
A: I hate seeing this kind of a question. I work so hard to get the trading ideas I do come up with, both near-term trades and long-term investments, and I would tell you if I thought there were some great near-term pitches. I’d probably swing at them if I saw some right now. But see, that’s one of the most important lessons you can learn here on TradingWithCody.com — we have to let the pitches come to us. We don’t want to wildly reach for pitches we see just because we see pitches. We don’t have to stand in the batter box ’til they bring in their one-eyed pitcher with six grand-kids. I like swinging at the pitches he throws. So I wait for his pitches. He ain’t in the game right now. So I’m working on all the little things that will go into helping me hit the next pitch, the next time I choose to go up to bat, out of the park. In the meantime, here’s hoping they score lots of touchdowns and slam dunks in the next World Series match.
Stocks
Q: Hey Cody–big bounce in NetFlix today–any thoughts on initiating a short position?
A: I wouldn’t call a 4% bounce off a 52-week low “a big bounce,” just to be clear. But I’m not much of a fan of NFLX near-term at all and one of the best traders I know is looking to short it on any strength. I’m out and not looking to return to NFLX anytime soon.
Q: What’s your take on earnings from GLW and BRCM in the past 24 hours?
A: GLW: The LCD glass maker posted revenues of $2.075 billion, up 3% sequentially and 30% year-over-year, and ahead of the Street at $2.01 billion. Non-GAAP profits of 48 cents a share were nicely ahead of the Street at 42 cents. “We had a very respectable quarter with all of our segments showing double-digit percentage sales growth over last year,” CEO Wendell Weeks said in a statement. “Our results were in line with the revised forecast we provided in September, when we first explained that LCD glass volume would be lower than expected as a result of a slowing in panel maker utilization rates and some share loss” at the company’s Samsung Corning joint ventures. “We saw particularly robust performance in our Telecommunications segment with strong year-over-year growth in all product lines. Global demand for optical fiber remains healthy,” he added.
My take on GLW is that the quarter was pretty darn great especially after seeing so many other component suppliers miss and guide lower the last couple weeks. The fiber optic demand being strong is interesting, in that TLAB, CIEN and so many others have seen demand slacken.
Q: Do you reckon that at 14+, GLW is still a good buy?
A: I’m holding onto all of those GLW calls I bought back when it was close to $12 a few weeks ago as noted here on the site in real-time. I think it can easily get back close to $20 in the next year.
Q: Cody do you have any comment on AKAM? Thanks Cody! Appreciate it.
A: I flagged AKAM as a big buy here in the chat a few weeks ago when the stock was closer to $20 a share. It’s had a nice rally off those lows from the summer crashes, and that might be indicative that the fundamentals aren’t bad either. Feet to fire, I’d expect they report a decent quarter and guide inline, and the stock pops 5-10% tomorrow. But anything less than decent and the stock will drop below $20 again. Ouch, these coals are hot on my soles!
Q: BRCM has dropped from its recent high of 38, trading 35.5 now after its earnings last night. A better buy here after earnings or in general are you staying clear waiting for a larger pullback due to Europe news?
A: I like BRCM a lot in the mid-$30s. But…
“BRCM – cutting ests after earnings but keep $45 PT and reit OW – Despite management’s 4Q conservatism, which is driven by near-term macro uncertainty, we continue to believe that all the elements for above-average growth still remain for Broadcom in the form of dominant market share, multiple new product cycles, and new platform ramps at customers, which we think should drive solid growth in C12 and beyond. Management guided for 4Q revenues to decrease 8-13% sequentially, driven by softness in all of its market segments (mobile/wireless, infrastructure, broadband), combined with a few one-time events (ramp down of its TV business and HDD constraints on DVR shipments due to the flooding in Thailand). Cutting our estimates on near-term caution, maintaining $45 PT. We are cutting our C11 and C12 estimates to $2.84 and $2.80, respectively.”
That’s from JPMorgan’s morning notes. I don’t like seeing numbers cut. Might have to let BRCM settle into a trading pattern ’til the next quarter’s numbers change the ongoing estimates revisions downward.
Q: Hi Cody, I’m relatively new on your site. I am wondering what you think of AMZN after the hit it took last night? It’s trading over 100x earnings, unlike AAPL which is I believe at 11x. Your thoughts?
A: I like Amazon as a long-term investment, but I don’t usually trade it well so I don’t mess with it often. That said, it’s not at 100x earnings, it’s more like 60x next year’s EPS, but that’s still rich, especially compared to AAPL, as you noted. Amazon’s going to be dominant in a lot of areas — retail, tech gadgets, wireless services, cloud services, etc. — that I do think it’ll be much, much higher in a decade than it is now, regardless of today’s reaction to their earnings.
Q: Dear Cody, what do you think about LPS earnings? Thank you very much for your thoughts!!
A: I was surprised to see ANY top line growth at LPS:
“The mortgage servicing provider, which named Hugh Harris as its new chief executive earlier this month, expects to earn 57-59 cents a share in the fourth quarter. It also forecast revenue of $510-$520 million. For the third-quarter, the company reported net earnings of $40.5 million, or 48 cents a share, compared with $78.7 million, or 85 cents a share, last year. On an adjusted basis, LPS posted a profit of 59 cents a share. Revenue fell 14 percent to $532.1 million. Analysts on average were looking for a profit of 54 cents a share, before items, on revenue of $511.6 million, according to Thomson Reuters I/B/E/S. Revenue at LPS’ mortgage processing division rose 4 percent to $106.4 million.”
I love this propaganda from BizJournal’s LPS earnings report report: “Company executives expressed concerns about broader macroeconomic conditions and ongoing industry-specific pressures, but LPS’ new president and CEO, Hugh Harris, remained confident about the company. “Despite difficult market conditions and sustained challenges in the broader macroeconomic environment, LPS, with its strong market presence and broad-based, technology-driven solutions for the mortgage and real estate industries, remains well-positioned for the years ahead,” Harris said.”
“Well-positioned?” For what, continuing to screw up the entire title system and then trying to pretend you didn’t and that you’re actually doing something legitimate? You’re not. I’m probably going to buy yet some MORE LPS long-dated puts in coming days and weeks.
Q: What about MIPS?
A: I like MIPS below $5 as a long-term investment. No idea how to trade it near-term right now. Would rather own SNDK or GLW or ARMH.
Q: What is your feeling on WTW? I’m short right now into this run up.
A: I’ve got no edge for you as far as trading WTW. But it looks to me like it’s got an awful balance sheet and at 15x next year’s earnings on a 10% top line growth estimate, that stock would likely get a NFLX kind of spanking if it doesn’t deliver. Speaking of which…does Weight Watchers deliver? I know Pizza Hut does.
Q: What do you think of BIDU earnings tomorrow? Cody thanks for your comment on BIDU!! You rock!!
A: I’d rather be short than long BIDU into tomorrow’s earnings report, simply from a trading perspective. But I’d rather be a buyer than a seller if the stock were to get hit big after the report.
Q: Hi Cody, what do you think of OCZ?
A: OCZ’s own description: “The company offers flash memory storage, thermal management solutions, and computer power supplies, as well as AC/DC switching power supply units and computer gaming solutions.” They need to break into smartphones/tablets in a big way or they’re doomed to be a small cap forever.
Q: Any reason you know why GOOG dropped to 572 this morning? Would have made a nice buy if I was around…
A: I don’t know why GOOG or most other single stocks do what they do an a single morning’s intra-morning action…but yes, it would have been a great buy.
Q: Cody, as someone who wasn’t able to get into NUAN before it’s big run-up, what’s your opinion on investing in NUAN….wait for the expected Europe pullback?
A: NUAN still rocks and is likely to see estimates continue to rise in future quarters. I sold some calls for a huge profit earlier this week to raise cash and cut back on my net long exposure, but I’m still holding a good investment in NUAN and plan on remaining to do so for a long time to come.
Sorry I didn’t get back to you in time on FIO. I fell off my chair when I saw it in the Barron’s list. It does look like a very well-positioned company, but I still haven’t grown comfortable with it. I’ll need to talk to management there at some point to get a better feel for their business.
All right guys, I just had a Subway delivered. Let me know if you find out if Weight Watchers delivers too. Thanks for subscribing, thanks for reading, and thanks for the great questions, once again. I’ll get a couple blog posts out before the close. I’ve even got a couple trades I’m doing right now that I’ll let you know about. Please continue to spread the word about TradingWithCody.com.
