Apple suppliers, Why I went from GE bear to bull, Calix, Nvidia and more

Here’s the transcript from this week’s Live Q&A Chat.

Q. With two of $AAPL’s suppliers ($LITE & $SWKS) having warned that they will miss revenue estimates big time, why aren’t you more concerned about what they might be signaling about iPhone revenues at Apple?

A. In the 16 years and 20,000% gains that I’ve owned Apple now, I’ve learned that trying to game what AAPL’s stock will do and/or what the company’s next earnings report will signal is futile at best and a losing strategy at worst. Sometimes Apple’s suppliers get hammed on margins because Apple renegotiates prices all the time. In this case, Apple and every other major manufacturer in the US is scrambling to figure out their supply chain as the Great Trade War of the 21st Century escalates. And I’m sure that is part of the pain at LITE and SWKS. That said, it’s always good to be concerned about any investment, including Apple.

Q. Any thoughts on NVDA before earnings? Yesterday you have added to just PANW and SNAP, but not NVDA, though it was already in the “nibble” range. Do you guess it might go down even more after earnings and then we shall add more?

A. The NVDA nibble yesterday, now in hindsight, sure would have been a good one, at least for now. That said, I own NVDA from the $30 level and I’m just not in a rush to add to it because it’s already such a big position for us courtesy of the big gains we have in it. As for earnings, I have no idea. And that’s when I suggest not trying to game the earnings report. You have to know expectations and have a reasonable guess about the fundamentals to game earnings reports. I don’t have the sense of either this time.

Q. Those two Apple supplier warnings and Apple also stopped giving unit guidance, so with that gloomy backdrop it’s curious that you’re dipping a toe in with calls. Might you be anticipating some relief from the Great Trade War in the next couple of months?

A. I’d ask you to rethink your assumption. Don’t I always preach that it’s usually the best time to buy call options when the outlook and rumors and innuendos are “gloomy?”

Q. What do you think about energy markets short and long-term?

A. Fossil fuel energy is in secular decline forever. Alt energy like solar is in secular growth for many decades to come. I say avoid cyclical industries that face secular decline and buy secular growth revolutionary companies.

Q. What shall we do with CALX? We have finished just with the first tranche and did not add more, now what? Add more or even trim after the recent pop?

A. I always wanted CALX to be a small position in the portfolio by nature of its binary risk/reward ratio. I’m just going to hold my Calix for now.

Q. Regarding Calix, CALX – around the end of September you said you would wait for another 2 quarters for what you believe will be a binary outcome. Señor Roberto Marcin has recently said he’s looking 8-10 quarters out and thinks the stock can double. That’s about two years difference in terms of timeframe. Do last week’s earnings affect your two-quarter “binary outcome deadline” or are you sticking to it for now?

A. The answer that I’m not expecting the stock to double in the last two quarters but that I do expect to figure out if they’ve got the customer wins that will make it go up maybe 3-5-fold in the next 3-5 years. But I’m not convinced yet.

Q. With the meteoric rise in Calix why do you think there was no sell off when the market took a big hit? I know this may require insight you don’t have but I thought I would ask? Has it something to do with who owns the majority of shares?

A. There could be a million reasons that there’s been more buyers than sellers of CALX despite the market getting hit hard the last few weeks. The main reason this time is probably because the company had plenty of promise in their recent earnings report and that’s been enough to get some people to buy into the stock and those of us who own haven’t wanted to sell it to them. So the stock has been steadily higher. That said, it’s probably time to trim some CALX if you have even a medium-sized position in it.

Q. Snap keeps going down every day .What’s the catalyst to get this stock up?Losing users, losing execs, business growth decreasing. Instagram copied most of what snap did, and most people like IG better. I bought it on Cody’s rec, already down 6% not sure it was a smart move. I’m also finding that Cody is usually early with his picks of late. They may pan out, but 6-12 months down the line.

A. I’ve outlined the whole analysis behind buying SNAP here (I’ll grab the link for the transcript). As for being early, well, I’m not expecting to nail the bottom in every stock the first tranche purchase. That said, go look at UA or Verizon and maybe a few others that I bought darn near at the bottom tick!

Q. Cody In your recent trade alert email regarding selling Western Dumpster Corporation ($WDC) , you noted 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”. Does this mean you’re a little bullish on $MU at these levels? The stock does seem pretty darn cheap (but of course the cheap can get cheaper…)

A. I am impressed with how well Micron has paid down their debt and built up their cash on the balance sheet. Yes, I do think I might MU here. But I’m in no rush and will do some hard core homework on it first.

Q. For what it is worth, Zacks gives SNAP a rating of 2 (out of 5) as almost all analysts have raised their earnings estimates over the past 60 days

A. I find that Zacks ratings are not worth anything. LOL Seriously though.

Q. Do you like LTHM?

A. I don’t typically like to invest in a miner or commodity supplier unless I’ve met the management and really understood the books. If you want to invest in lithium, I’d suggest trying to find ways to invest in it directly rather than in a lithium miner. I don’t know anything about the lithium market, so I probably won’t be investing in it unless I do LOTS more homework on it and the companies involved in it.

Q. Thought on CRNT as a 5g play?

A. I’m working on CRNT actually right now. Let you guys know if I pull the trigger of course.

Q. Speaking of dumpsters, yesterday you moved away from being a long-term bear on $GE. Just curious if you have any thoughts on another formerly huge (and also non-revolutionary) name that’s been tossed away… $DB?

A. While I’ve been following and commenting regularly telling you guys to avoid GE for years, I can’t say the same for DB. I don’t know enough about German banking laws and what’s going on with the ins and outs of the German banking industry much less what’s going on at DB specifically. So no, no DB for me to paraphrase soup nazi.

Q. Can you expand a little bit then on why you’re now a “newfound GE bull”?

A. I think GE is priced as if it is likely to go bankrupt here. You heard people on CNBC yesterday saying that GE is trying to avoid bankruptcy. I don’t think the liquidity issues or the balance sheet are nearly that bad. I think Warren Buffet or someone with deep deep pockets might come along here and build a position in GE and help it get access to cheaper capital. And it’s paying a 0.5% dividend LOL. But going back to your earlier question about gloom and why I would want to be buying AAPL call options “into the gloom.” Same thing here, there’s no question that people are GLOOMY and have given up on GE. The stock might drop further from here and it’s not a Revolutionary enough company for me to get terribly excited about it here but the fact that it’s not being driven by algorithm trading and ETFs and all that also makes GE a decent hedge against the broader market moves.