Cannabis Bubble Playbook, Instagram Exits, Pearl Jam and lots of stock talk
Here’s the transcript from this week’s Live Q&A Chat where we cover things like my playbook for The Cannabis Bubble, how Verizon will generate growth from 5G and much more.
Q. Shall make use of Cannabis bubble somehow, like we do with crypto? You have said, that you were bullish on it.
A. All things in good time. I just had no clue that cannabis would bubble AGAIN. Remember in 2012 or 2013 when all the fraudulent penny stocks were changing their names to cannabis-something and their stock symbols to MJNA or CBDS to get pops for insiders to unload shares into and how I warned over and over about many of those penny stocks by name and how they all fell 95% or more in the next few years? Well, I used to write about how tech would one day go into an “Echo Techo Bubble” after the Great Dot Com bubble had turned into a crash. I just didn’t think there would be a “Weedo Repeato Bubble” too. But yes, I would like to own some cannabis-related names, but I’m not going to be chasing these things while they’re up 500% or when companies like XON and others go around trying and getting 30% pops in their stocks that adds a billion dollars in market cap by announcing “Cannabis research.” I expect that this 3-month-old current cannabis bubble won’t end well for the longs (and will continue to kill a lot of shorts along the way too) and when it does, there will probably be some great opportunities to find some Cannabis Revolution stocks to invest in for the next 10-30 years.
Q. Cody, FB just can’t seem to get out of its own way. Plus possibly more government scrutiny? I know generally you feel government threats don’t amount to much. I’m still holding as i know you feel in the future FB will sell higher than $160. Any new thoughts? Thanks.
A. Well phrased. Here’s what the biggest and most concerning headline you’re referring to: https://www.cnbc.com/2018/09/25/instagrams-co-founders-said-to-step-down-from-company.html You guys know that several years ago I started saying that Facebook’s acquisition of Instagram for a billion dollars was probably up 100-fold and was now worth $100 billion. In the article, it mentions that other analysts now think Instagram is indeed worth $100 billion or more as part of Facebook’s overall $500 billion market cap. And now Instagram’s CEO and CTO founders are leaving Facebook. Not good, I agree. I don’t think I’ll freak out and sell any more FB today off that news, but I do need to sit back and spend a few days immersed in Facebook analysis. The stock is trading at 22x next year’s earnings which isn’t terribly expensive and could be considered quite cheap if the company delivers another 25% topline growth next year as analysts expect it will. Sitting tight on FB, which I’ve taken profits on higher, for now.
Q. WDC seems to be making a bit of a come back. Any idea what is moving the stock?
A. Eh, the stock’s barely bounced 10% off its recent lows, so I’m not sure I’d call it a come back (to paraphrase the great LL Cool J). The stock is trading at 3x this year’s and 5x next year’s earnings estimates, making it one of the cheapest large cap tech stocks on planet Earth. That might be why it bounced. Looking out in three or five years, if there’s any pricing upticks and margin growth and especially if there’s any topline growth (up from this year’s and next year’s expected 0% topline growth) the stock could triple or more. There is of course downside potential too, if pricing fails to firm and growth fails to materialize, but for now I want to bet on WDC’s potential upside in 2021 or so.
Q. “Cody, thoughts on AAPL CRM partnership?
A. “Salesforce (CRM – Get Report) and Apple (AAPL – Get Report) are joining forces to bring Siri and other iOS features to Salesforce customers and developers.” Not impressed. Because while Apple’s working on Saleforce’s customers and developers, Amazon’s releasing 20 new Alexa-enabled devices and you never see any products tout how their “Siri-enabled” — you see “Alexa-enabled” products everywhere you go though. Do you personally know anybody who is a customer or developer for salesforce? I mean there are millions of them around the world, how many do you know? Meanwhile, we both know hundreds of people personally who use Alexa in their house and office every day. Amazon is winning The Voice Revolution, that’s what I think about when I see Apple announce a deal to “bring Siri to Salesforce customers and developers.”
Q. @Cody: HI Cody. Any thoughts on SMAR? Financial Advisor got me in at 20 right after IPO. Has done well. He seems to like them long term. Was thinking about buying more. Stiff competition though, but that’s expected.
A. “Smartsheet Inc. provides cloud-based platform for execution of work. It enables teams and organizations to plan, capture, manage, automate, and report on work. The company offers Smartdashboards that provides the status of work to align individuals, managers, and executives; Smartportals to easily locate and access from any device the resources available for a project without IT assistance; Smartcards to organize, share, and act on workflows; and Smartgrids to keep teams on task by easily tracking multiple moving parts. It also provides Smartprojects; Smartcalendars…” Sounds interesting. Let’s look at the financials and fundamentals. Ooh boy. The market cap is more than $3 billion. The company ain’t profitable and ain’t expected to be profitable next year either. Topline is supposed to grow from $170 million this year to $235 million next year, with topline growth slowing from 50% to 40%. That means this is yet another small start up tech stock that’s trading at more than 10x next year’s sales estimates. I’d be more inclined to trim that stock than to buy more at this level at this time. But I don’t know it at all other than what you just saw me analyze here.
Q. Given the 5G revolution VZ stock you suggest owning, any thoughts about QCOM as they supply a lot of the components for this revolution.
A. One of Qcom’s biggest customers, Apple, is in an ugly fight with Qualcom that’s getting uglier all the time (today’s latest: https://www.cnbc.com/2018/09/25/qualcomm-accuses-apple-of-giving-its-chip-secrets-to-intel.html). I’ve read books about Qualcomm and how the founders created and positioned it and I know the company well. But I don’t like to invest in battlefield stocks and I’m not sure that 5G growth won’t just mostly replace 4G sales declines for Qualcomm in years ahead anyway.
Q. Cody – whats your take on Blackberry and possible long term play ? Thanks.
A. Here’s what I wrote about in May when I sold the last of my small BB position: “I’m selling my Blackberry shares that we’ve had for less than a year. I’m up a little more than 10% on this small position and I am unhappy with the lack of traction the company is making in driverless.” Looks like a stock that could trade between $5 and $15 for years.
Q. Cody – you had mentioned XLM could be AMZN of cryptos potentially along with BTC. Are you changing that opinion since you think it may not be used to store value ? thnx
A. No, not changing my mind. Just being aware of the risks and sharing that analysis with you.
Q. Cody I know you are quite positive on Verizon’s overall potential with 5G, but could you provide a little more color on how you believe they will be able to grow earnings in the coming years? Basically, where do you believe the growth itself could come from? More subs, margins, apps, etc…
A. I don’t think we have any idea how many new applications and uses and platforms and concepts will be created when you can have 20-300x more speed and not have “Wifi” any more (ooooh….note to self, find companies that depend solely on Wifi products and services for revenue and short them!) because anywhere you have cell service, you and all your devices and cars and household items will have incredible bandwidth access… So anyway, Verizon will nickel and dime and raise prices as they lock customers in and (basically) collude with AT&T and Sprint/T-Mobile in pricing and strategies and the new applications and uses will cost you an extra $1 here and an extra $5 there and their enterprise customers will get hit for an extra $100 here or $5000 there. More useage, more demand, less competition…that’s how I think Verizon grows topline in years to come.
Q. @Cody Nasdaq.com, Yahoo finance, MarketWatch seem to consistently have different financial numbers when trying to track stocks. Even when I do own simple calculation of shares x price, often times market cap doesn’t even closely match. What is your first preferred trusted go to source until doing your own number crunching. I’m starting to feel like making a database of TWC stocks and multiples because they are so inconsistent and inaccurate.
A. Hmm, most of the time I just use Yahoo Finance when I’m doing the quick analysis you see me do here in the Chat Room for example. But I would probably say Bloomberg usually has the highest quality, most reliable data.
Q. Cody – whats your take on NIO – recently IPO as TSLA of China ? Thanks.
A. Interestingly, I can’t find financials on NIO. And “The Tesla of China?” Oh man, that sounds like something I’d never buy! Seriously — I don’t like to invest in China-based companies very often and I don’t like the sound of the one floor elevator pitch their US marketing team came up with.
Q. I don’t have a question so much as a comment. The markets have been very choppy of late making it psychologically difficult to hang onto positions. Who was it that said that your worst trading enemy is yourself? Jesse Livermore? Anyway, I agree with you that trimming, hedging, and cash is the best strategy for now. I’ll find out when I have my chat with you in week or so!
A. Yes it was and yes and thanks for the kind words and I look forward to our Lifetime Subscriber chat.
Q. What is your year end prediction on the Nasdaq and next year? Another 20 percent up year? A
A. Feet-to-fire guess for the Nasdaq at year end is that it’s down 5% from this current level. F2F guess for the Nasdaq year-end 2019 — up 5% from this current level, so up maybe around 10% for 2019 or so. Not that I’d be trying game any of that, just throwing out a guess for you since you asked.
Q. Regarding Calix, do you have a trading “deadline” (so to speak)? Meaning, how far into 2019 are you willing to hold this name in hopes of them landing a contract with Verizon? Q1? Summer? The Autumnal Equinox?
A. Good question. Frankly, probably another two quarter is how far I’ll wait. I’ll make some calls about Calix today and see if I can get a bead on any contract potential updates.
Q. Cody, Would love to hear your ranking of these five 90s bands: The Smashing Pumpkins, Nirvana, Green Day, Foo Fighters, Pearl Jam
A. In 1999, I would have ranked them this way: Pearl Jam, Smashing Pumpkins, Nirvana, Foo Fighters, Green Day. In 2018, ranked by the most listened to on Spotify (by the way, I’m testing out Tidal right now and probably switching from Spotify to Tidal so I can stream lossless files — 4x the highest bit rate available on Spotify): Pearl Jam, Foo Fighters, Nirvana, Smashing Pumpkins, Green Day.
Q. Funny, I was going to ask Cody better voice (or who he prefers) Cornell or Vedder.
A. In 1999, I might have called it a tie. In 2018, I definitely prefer Vedder’s voice.
