Chat transcript: How to trade Google, Apple, and much more

Here’s the transcript of today’s chat. If you want an icon to show up here in the chat when we meet, you can upload a photo to gravatar.com and it will show up here next time you visit.

Q: Any thoughts on Blue Coat Systems, Inc. (BCSI)?

A: BCSI is in the 100 Most Important Tech Stocks on the Planet book:

“Turns out the browser wars didn’t die with Netscape. No, one of Blue Coat’s many innovative and secure products is the new (and horribly named, I must say) K9 Web Protection Browser that is a family-safe web browser for iPhones, iPads and iTouches. I know I’ll be using that K9 browser the next time one of my three beautiful nieces borrows my iPad. Both the new browser and Blue Coat’s current businesses use the company’s cloud based servers and networks to give users up-to-the-moment protection from new threats, phishing, malware, and other malicious content. And if there’s one pitfall to our ever-connected app future, it’s security. Blue Coat is a company that’s getting in front of that issue way ahead of time and there will be huge demand for Blue Coat protection in coming years. The company’s got a couple hundred million in net cash on the balance sheet and a market cap of only about a billion and a third. With estimates for 2012 that are likely too low—the company sure as heck better be able to show more than 7.5% sales growth next year—the stock isn’t terribly expensive with its 16x multiple. As we get closer to 2013, we should be looking at $2 per share in earnings or so and with a 20 multiple on that, we’d be looking at a $40 target. Revolution Investing rating: 7/10.”

Q: New thoughts on RVBD? How long do you think it will keep stinking up the room?
A: Last week I told the story about insider selling at a fashion house and how it applies to RVBD presently. They’ve been downgraded also recently because of concerns about IT spending impacting their near-term performance. Perhaps. I tend to think that is more than priced in under $20 and is priced in down here in the low $20s. Longer-term, this is one of the best-positioned companies, and the fact is that their business model mostly resides around going in and saving IT managers huge money on their network costs. That will also work longer term, and the company is becoming a de facto standard which is also key to our long-term thesis.

Q: Cody what kind of earnings play do you have for us on GOOG? I noticed this is your largest holding. You must feel good about it going into earnings.
A: Google, as I’d said last week, was a screaming buy at or below $500 and if it ever goes there again, it will be a screaming buy again. I’d wanted to wait to this week to add to my already very out-sized Google common and calls positions, but the stock has now run 10% into earnings and those existing calls are really kicking in on their own. And for that reason, along with the fact that I’m trimming down the overall net long exposure in the portfolio today after the huge run we just had in the portfolios and in the markets, I’m not adding to it before the earnings call even though I expect it’ll be a very good call and that the stock, feet to fire, will pop even more after the call. Nothing is easy in this trading profession and this won’t be easy either. That much I do know!

Q: What’s your take on NFLX?
A: I was right to have gone bearish on it but wrong to have not just bought some puts on it when they’d originally announced that incredibly stupid Qwickenster or whatever it was spin off. Near $100 it might be a buy for a trade, but that CEO and that decision to backtrack from the original price increase that was short-term hurting the company’s growth was a killer to this stock’s multiple expansion. Not sure it’ll be a long til they get their growth back on track. And if that were to happen, we’d have to pay up from wherever it bottoms, but I don’t think it’s profitable to try and catch that bottom — if it were to come — as a rule anyway.

Q: Your thoughts on ADTN? Let it ride or add?
A: ADTN ‘s main business is selling to the carriers…including AT&T, which, as you know from previous writings here on the site, is pulling back on the spending as they lobby/bribe to get the T-Mobile acquisition done. I’m officially very disappointed in myself for being long this stock at all after having presciently sold our Ciena profitably for that very reason. Mea culpa. I will re-evaluate what to do with this position after I get back from NYC, and listen to theirs and other conference calls.

Q: Are you still shorting BK?
A: Yes, I still own puts in BK. The litany of litigation that is likely (alliteration is always a losing idea, huh?) could take months or quarters to play out in full. Can’t rush them, you know?

Q: What is your latest take on NUAN?
A: Nuance is a great long-term investment. It’s a brutal stock to try and game short-term, so mostly don’t try that. Speech recognition applications in the home, the car, the phone, the TV, the toilet…speech rec apps are going to be everywhere. I plan to own Nuance for a long time unless some company buys it first or something goes terribly wrong with the company itself.

Q: Any take on BIDU’s earning call for next Monday? Will you bet on that before the earning call?
A: BIDU’s very attractive down here after having been so brutally crushed this year and this fall. I’m not going to play it either way before earnings, but feet to fire, I’d guess that it’s more likely to go up in the near-term and the long-term from these levels.

Q: Cody any view on 3-D printing? SSYS and DDD?
A: I don’t know them well enough off the top of my head to give you a competent analysis of either SSYS or DDD.

Cody: How about those new features on TradingWithCody.com? You can see headlines from CNBC, MarketWatch, AP, and others in the ticker in the gray bar at the bottom of the site on every page. Likewise, in the base bar below we’ve now put in embedded links to Yahoo! Finance  and other resources so you can check earnings dates and access Yahoo! Finance without ever having to leave TradingWithCody.com. And we can now do video chats, classroom sessions with collaborative white boards, and much more in the “Communicator” application that you can also find in the base bar below on each page of TradingWithCody.com. In the “Communicator,” you can also instant message other visitors and much more. I’ll start conducting and recording some online classes/video chats, so stay tuned for that. Be sure to check out each and every resource on the site to get the full value out of the site.

Comment: I really like the latest new scroll and the easy earnings pop-out. I find them very useful and convenient.
Comment: Base bar is very cool, Cody.
Comment: I love the new features, by the way, and the idea of classroom videos, especially on some option stuff, would be great.

Cody: P.S. Also go check out my other site that I’ve founded and built lately– http://www.WallStreetAllStars.com. I’ve used a lot of what I’ve learned building that site to add features and ideas here on TradingWithCody. Here’s the full About page on WallStreetAllStars.com (you’ll notice I even used some of the wording in there earlier today here in the chat):

“WallStreetAllStars.com is a revolutionary financial news hub featuring original trading ideas and portfolio strategies from the best money managers, traders, pundits and financial reporters on the Internet. A Wall Street All-Stars Platinum account gets you full access to every article and feature on the site. A Platinum account will also allow you to connect to some of our best writers in real-time here on the site. Sign up today for $49/month or $499/year. Whether you sign up for the full membership or not, you’ll find the site a better and easier to use resource than any other financial news site on the Net. Be sure to check out our revolutionary breaking news page, full of the latest headlines and links to the latest business articles from AP, WSJ, MarketWatch, and the other best financial news resources around the web. And you can also see headlines from those same organizations, including FT, Reuters, CNN Money and others in the ticker in the blue bar at the bottom of the site on every page.”

Q: Per your network, is the first month/last month free deal still in effect?
Cody: You know what guys? I’m going to give each and every subscriber to TradingWithCody.com a six month free trial subscription to WallStreetAllStars.com. We need to generate some traffic on there anyway and I bet you guys will learn a lot over there that we can discuss and use here anyway. Just go sign up over there the same way you signed up here and I’ll make sure they rebate you the full $49 fee each and every month for the next six months, ok? Send an email to support@tradingwithcody.com after you sign up so we don’t miss it, but either way, you know we’ll take care of you. Rock on, eh?

Comment: Thanks, Cody, that’s awesome.
Comment: Superb.
Comment: Cody, thanks for helping teach discipline on doing the hard thing. Selling the AAPL & GOOG calls on a nice 1-2 day pop up would have been easy but the hard trade was holding for more and it is working! Love your insight and service.
Comment: Hey Cody, just thanking you today for those ADSK, SNDK, GOOGLE, GLW and, of course, APPL calls. Pretty spectacular run you’ve got going.

Q: Cody at what point does the market give AAPL the forward multiple the company deserves? I know we are talking about a huge market cap and that scares a lot of Growth investors away. But with the number of new carriers both domesticlly and abroad beginning to sell the devices, it seems that continued growth should be there for APPL for years to come. I’m waiting for the breakout earnings that catapult the stock over $470. Could next week be the magic week?
A: Apple’s standard P/E will likely always be between 10 and 16 (and therefore much cheaper on an ex-cash basis) or so I’d guess, as it has been for years now. They’ll have to keep growing earnings and revenues nice and steady and large for the stock to eventually hit my $1000 by 2020 or so price target.

Q: Is there a target number for ADSK when you’d sell your upcoming OCT options? It’s well up today.
A: Can you name the timeline on this chart without looking at the x-axis? http://chart.finance.yahoo.com/z?s=ADSK&t=5d&q=l&l=on&z=l&a=v&p=s&lang=en-US&region=US
That’s a FIVE DAY chart of ADSK. It’s up 20% plus in five days on no catalyst. Jim Cramer used to preach to me all the time: “Bulls make money, bears make money, but pigs get slaughtered.” Fair enough?
Q: OK, I am being obtuse. So, you’re saying it would be piggish not to sell it now. Are you selling? Or am I  just not understanding. Forgive me if I’m being stupid.
A: Oh, sorry, you’re not being obtuse, I was being cryptic by trying to not say it so bluntly, but yes, as you put it: “it would be piggish not to sell it now.”
Q: Thanks Cody. I guess I can’t complain about 350% profit! And thanks to you for that. Very, very much.
A: By the way, I’m not saying to sell all of it! Just some of it. I’d look to take some off the table after this big run with those kind of profits.

Q: I am new subscriber to the service, so I am not sure if its already covered. Do you recommend buying any specific calls or puts before WFC earnings?
A: Thanks for subscribing, James and welcome to the site. I would let you know if I were to make any pre-earnings trades on WFC or any other stocks. As it is I’m sitting on some nice profits in the WFC puts we bought back when it was closer to $30, I believe. I recently added some BAC common stock and some GS calls to my portfolio to position it for a potentially big-time counter-trend rally in the financials, but other than that, I’m not doing anything new with WFC just now. I always tell subscribers that I don’t have any magic bullets, but I will communicate to you how I’m giving my own personal portfolio as much upside potential with as little risk over the long-term using both trading and investing strategies that I’ve mastered as a successful professional trader and money manager over the years. Wow, that was a long sentence.

By the way, you and all of you dear subscribers can let us know how we can better serve you and how you like the service by emailing us at contact@tradingwithcody.com.

Okay, guys that’s it for today. Another very informative and interesting discussion. I learn a lot from these chats. Thanks for all the support and for subscribing, everybody. There will be a dearth of trading posts in the next couple days, but this Occupy Wall Street movement and its ilk are likely going to be growing in importance both politically and economically, and therefore to our trading, so I’m heading into the eye of the hurricane. Stay tuned. And be sure to go get your six month free subscription to http://www.WallStreetAllStars.com. Just go sign up over there the same way you signed up here and I’ll make sure they rebate you the full $49 fee each and every month for the next six months, ok?

Come back next week at 2pm EST at http://tradingwithcody.com/chat for more Q&A where you can ask me anything.