BABA Poetry, Interest Rate Outlook, Odds That Trump Leaves, Etc
Here’s the transcript from this week’s Live Q&A Chat.
Q. Cody. What odds would you give for a constitutional crisis due to the challenge to the legitimacy of the presidential election?
A. 10%? And that’s high enough that it should factor a bit into our risk/reward scenario for stocks a bit. It’s not an insignificant risk even at 10%.
Q. I’ve noticed interest rates begin to rise, which of course factors into just how under/overvalued many view the market. Does this concern you presently? If not, at point would it begin to be worrying to you?A. I’ve long said that one of the biggest threats to the whole US system that the Republican Democrat Regime has created over the last few decades and which requires very low and/or ever lower interest rates…would be a significant rise in interest rates. The Fed doesn’t control rates, though it tries very hard to and can control them somewhat for a few months or years.
Q. Cody. Is there still a play on TLT puts? Not sure how a Biden victory would change it.
A. I still have a few TLT puts that I’ve trimmed lately, but am still holding a few. Nothing changes in the analysis that we’re likely to see higher rates in future months and/or years when the Republican Democrat President changes faces.
Q. Can you please give specific options contracts in your trade alerts? You mentioned you nibbled calls but I had no idea which ones to buy?
A. Yea, sorry, I rushed the article out a bit because the stocks/options I was buying were looking very good at the early morning trading when they were down big…as usual, I mostly bought some slightly out of the money and/or some slightly in the money options dated out about 2-4 weeks.
Q. Cody are you doing any trading today?
A. Managing a few hedges in the hedge fund but not much at all there and nothing in the personal account today.
Q. Any thoughts on adding BABA here?
A. Baba’s starting to stink, I think (rhyme not intended or meant to leave anyone offended). The Chinese government seems to be sending the world some red flags about BABA’s standing in the communist regime, which is mostly what determines the winners and losers in China where nothing is ever what it would seem. I’d think some BABA puts might be a good trade, if there is a trade to be made. (Hey, I’m a poet and I did not realize it! haha.)
Q. Thank you so much for the update. You must have been working on this just as I was writing up the request One question – I didn’t notice FVAC on your list. Is this just an accidental omission, or because you’re no longer interested in it?
A. Accidental omission. It’s my latest new stock pick and I definitely haven’t lost interest in it.
Q. So, what price would you be nibbling at more FVAC?
A. I don’t know, maybe here-ish. Maybe closer to $11 if we get the chance again. No rush.
Q. Cody – A lot optimism coming from the management of SPCE and their stock has seen a bit of a rally since the last trade alert to nibble. If they actually hit on their vision, what kind of gains could we reasonably expect?
A. This kind of question about how much we can reasonably expect to make on a stock that’s in a big rally mode, well, it always makes me a bit uncomfortable to be frank. As a short-term trader, I’d probably consider locking in a little bit of gains here if that’s what your goal was. As a long-term investor, if Virgin Galactic delivers on some of its goals over the next five and ten years, it could be up many fold from there.
Q. Have you looked at MAXR as a stock for the SPACE REVOLUTION.
A. Yes, and I think it’s a great short hedge for my SpaceX and SPCE and other Space Revolution investments. They have a sunk cost of hundreds of millions of dollars into their 20 or 10-year-old satellites and technologies. Meanwhile spacex can build and send up a satellite that can do 100 times more than any of Maxars old satellites for about one 100th the cost. Plus I think they have some government contracts that are going to not be renewed. And their balance sheet is awful.
Q. Cody please give me your thoughts on Unity Software ?
A. U is like a lot of software companies right now — not quite yet profitable, but about to become quite profitable, growing 30% per year, huge gross margins, trading at 27x next year’s revenue estimates. Too expensive in this environment for me.
Q. Is TMO worth looking at now that it took a 8%, 42 pt drop yesterday? Or is it more likely to keep dropping and provide a better entry point?
A. TMO is an interesting company, growing topline 20% or more per year, 45% gross margins, currently trading at 24x next year’s earnings estimates. The chart is pretty steady and nice looking too. Selling “analytical and other instruments, laboratory equipment, software, consumables, reagents, instrument systems, chemicals, supplies, and services” during a pandemic is a pretty good business to be in, but I’m not in TMO and I’m not sure it’s revolutionary enough for me to get too interested in it.
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