Bitcoin penny stock scams, 30x cancer treatment markups, Machine learning hype & more

Here’s the transcript for this week’s Live Q&A Chat. Be sure to join us next Wednesday at 2pm, when we have the Live Conference Call Q&A.

What’s up, diggity dogs? Ask anything-o!

Q. As a new subscriber, do you suggest I begin with a 1/3 tranche into your positions at current levels or should I hold tight until each position dips down into the levels you have identified before you will increase your position? Thanks and looking forward to a prosperous future together.

A. Yes, I’d probably look at scaling into 1/3 or so of the highest-rated Revolution Investing names from my most recent Latest Positions update. And then I’d probably look to give yourself a little time and see if we can get a sell-off or a panic or two that gives you a chance to nibble a little more on those names if/when they’re down 5-10% or so from here…And thanks for joining and here’s a prosperous future, indeed!

Q. I am sure you saw the Barron’s article today on blockchain technology. Do you know of any companies that we could invest in that would capitalize on this trend? There is BTL Group on the Toronto exchange but it is a penny stock and I avoid those.

A. Long-time subscribers remember that I was writing about blockchain and how important it is and why I bought some Bitcoins and accepted Bitcoins as payment — back like four years ago, as in four years before the Barron’s report you cite.

I think Bitcoin is in a bubble right now (I just sold most of mine, which I’d owned for 3-4 years, last month) and I think most any publicly-traded apparent pureplay on blockchain/cryptocurrencies/Bitcoin are not legit companies.

That BTL.V company you cite is a great example of the under-belly scummy ways that the penny stock promoters/machine operate. I mean, BTL.V has no revenues that I can find, issues a bunch of meaningless but full of hype press releases, has management that proudly brags about being executives at energy-related penny stock companies that went out of existence…

Read on for yourself if you’re interested: BTL.V’s Chairman and CEO: “Mr. Brian A. Hinchcliffe is Chairman of the Board, President, Chief Executive Officer of Northern Aspect Resources Ltd. Mr. Hinchcliffe has decades of experience in the development of mining projects and mine finance. He is currently the President and Chief Executive Officer and a director of Kirkland Lake Gold Inc.”

Look up Northern Aspect Resources: “As on November 4, 2015, Northern Aspect Resources Ltd. was acquired by BTL Group Ltd. Northern Aspect Resources Ltd. does not have significant operations. It intends to identify and evaluate companies, businesses, properties, or assets with a view to complete a qualifying transaction.”

So BTL.V bought the CEO/Chairman’s company even though the company didn’t have any revenues or even any business or assets? And now, you can see the machine in motion, as BTL.V has gone up 1000% on the Bitcoin/Cryptocurrencies/Blockchain hype and guess what — the company and insiders are selling their shares!

The upshot of this is that I would much rather short $BTL.V than ever buy a share of it. $NVDA is probably the best publicly-traded stock that’s directly benefitting from the Bitcoin/Blockchain/Cryptocurrencies Bubble.

Q. Can you explain this statement a bit? ” $NVDA is probably the best publicly-traded stock that’s directly benefitting from the Bitcoin/Blockchain/Cryptocurrencies Bubble.”

A. Nvidia is directly benefiting by selling products that miners and programmers and entrepreneurs of the cryptocurrency world use. The cryptocurrency market’s not a meaningful driver of revenue for Nvidia and probably won’t ever be, but it does benefit Nvidia.

Q. Any quick thoughts on EXEL?

A. I’m not a big fan of investing in companies that sell their products to a government-controlled market (health care) at a 97%(!) gross margin. That means they are marking their product up 30x(!) the cost of it. I know they also have spent a billion dollars on research and continue to spend hundreds of millions, but 30x(!) mark up is outrageous. Apple’s gross margin is closer to 40%, meaning they mark their products up less than 2x vs EXEL’s 30x(!). I think $EXEL‘s gross margins will have to come down over time, probably dramatically at some point. I hope the company and their shareholders make billions of dollars selling drugs that cure cancer — but I hope (and expect) it’s not at 30x mark up.

EXEL spends 3 cents to make a product and sells it to a marketplace where they lobby the government to set the prices at $1 each! Or more likely, it costs them $300 to make the treatment they sell to the health care system for $10,000. That’s gross.

Q. Hi Cody – I want to revisit QCOM. They have some legal headwinds for sure, but they are smack in the middle of the internet of things movement. They will be a major player in cars with the merger of NXP. Pays 4% dividend with good growth potential. Any thoughts on their current situation? Wise to nibble on a bit here?

A. Those legal headwinds, ie Qualcomm is being sued by its biggest customers including Apple, have become revenue headwinds. Qualcomm’s revenue is likely to be down 3% this year and most analysts expect a slight drop again next year. Qualcomm’s highest margin businesses are what they are being sued over and the iOT side of the business will never have the same kind of margins. Too much uphill battle for my liking.

Q. Hola Cody, wondering how you might evaluate CRUS now this what the Motley Fool said about …. Audio-chip specialist Cirrus Logic has had a similarly strong run-up over the past year, with its shares gaining 63% in the past 12 months but also pulling back from recent highs. While that was partially the result of investor worry about just how much Cirrus still generates from sales of Apple (NASDAQ:AAPL) iPhones, the decline from 85% to 78% indicates it will undoubtedly start getting more money from Samsung and its Galaxy S8. But with Cirrus anticipating its technology to start trickling down to mid-tier phones as well, the chipmaker could see a profusion of sales in its future. Sure, having the best-selling, top-of-the-line smartphone makers as your prime moneymakers is good, but tastes can sometimes be fickle and one or the other will fall out of favor. A broad swath of the buying public owns these other feature-rich, lower price phones, and tapping into that market can be a huge benefit. Thanks.

A. $CRUS is probably one I should have bought when it was crashed down near $18 three or four years ago. It was really cheap at that point, though it’s not terribly expensive on a P/E ratio even today at $60ish. The company will earn $4.50 next year. But the problem is that the revenue growth is and has been in the single digits and isn’t supposed to be getting much better next year. More customers could fix that, but I’d rather see some proof of mid-market success before betting that it happens.

I do love how the company describes the markets it is in (ie, everything that has a chip in?): “It provides its products for portable applications, including smartphones, tablets, digital headsets, and speakers, as well as for wearables, such as smart watches, VR headsets, action cameras, and smart bands. The company’s products are also used in laptops, audio/video receivers, home theater systems, set-up boxes, musical instruments, and professional audio products applications; and serve the automotive market, which include satellite radio systems, telematics, and multi-speaker car-audio systems. In addition, the company’s products are used in industrial and energy-related applications, including digital utility meter, power supply, energy control, energy measurement, and energy exploration applications.”

Q. MIT Futurists tell the masses if you want to stay relevant during the age of machine learning, become a novelist or plan a career that traffics in human emotions/interpersonal skills and truly creative work (visionaries) because those experiences will be hard for ML to replace.

A. I’m growing sick of all the worry about machine learning destroying job demand. Technologies like machine learning enable people to specialize in new skills or more effectively in their old skills.

Ok folks, that’s a rap! Thank you. I’ll be around tomorrow and Friday and all next week in the chat room. See you here.