Cody Kiss & Tell: Apple, Twitter, GoPro, SPY and much more

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

Q.  $AAPL seems to represent a positive future for us these days. See any options plays on it? Would you counsel adding to common at today’s level?

A. I’d rather wait until the next time $AAPL tanks 15-25% from its highs in a panicky post-earnings-report or broader market sell-off before buying $AAPL  call options again. I’ve used that playbook many times over the last 12 years to supplement our gains of also just holding $AAPL common. Nothing wrong with scaling into a small tranche if you think the stock is something you want to own more of. Leave yourself room to add more later.

Q. I am quite patient, but curious. Lots of discussion about $AAPL today, but it seems like Wall Street’s standard for them is 1000% different than every other stock. These guys are performing in a big way, but their stock lags. Is this the market makers doing their thing? By lags, I mean there are no gaps up. We have recently discussed how it has quietly moved from the 110 range to where it is now, which is nothing to sneeze at, but does not seem to be commensurate to $AAPL performance and value.

A.  For the first few years after I bought $AAPL back in 2003, nobody believed the company could deliver a sustainably mainstream hit so the stock was cheap vs forward earnings most all of the time. For the last five years nobody believes $AAPL can deliver strong growth because of the law of large numbers. But the company keeps growing quicker than most small cap tech companies. I think we should accept that $AAPL will probably always trade at a discount to most of the market.

Q. Are you still planning to add some $AMBA calls?

A. $AMBA‘s up nearly 10% since I wrote “I’m looking nibble some more AMBA soon and I might even add some longer-dated call options to get some more upside exposure” just yesterday early morning! After that kind of a quick pop on no news, I’m going to let it ride as is into $GPRO‘s earnings tonight.

Q. What are you expecting from $SIMO tonight? I did trim a small amount after its small run into earning report?

A.  $SIMO‘s a small enough company that there’s added risks of volatility in both the stock and in any particular 90 day earnings report. I am holding my $SIMO steady and would likely buy more if it does get hit tomorrow after earnings tonight though I am optimistic that earnings will be strong. I’d rather be long than short SIMO into tonight’s earnings report though.

Q. What is your opinion about $TWTR earnings?

A. Not much new came out of last night’s earnings report from $TWTR to change what I wrote yesterday: “The problem with $TWTR right now is partly that their user growth has itself stalled. The company will grow revenue per user quite quickly for the next few years and they’ve got 300 million users so there’s growth to be had there. But unless Twitter gets to 500 million users over the next two or three years, the revenue there will stall. That said, Periscope itself could add hundreds of millions of users over the next 3-5 years and that would create a new revenue stream for Twitter anyway.” On the report and on the conference call commentary last night, Twitter basically confirmed everything I wrote there.

Q.  So I assume we are going to hold $TWTR for a better future and also not buying another tranche here. On a lighter note, do you know any analyst who is still left to downgrade $TWTR? 😉

A.  Stifel actually UPGRADED $TWTRtoday. But yeah, most analysts have had to downgrade it since it came public and has serially disappointed Wall Street.

Q. Can you give your analysis about $AYI?

A.  I don’t know anything about the company but it looks expensive to me at 25x next year’s earnings with a balance sheet that’s got $500MM in cash and $300MM in debt. Nice revenue growth at 12% per year but I don’t know if some of that is attributable to acquisitions or if its all organic. Stock has been on a tear for 5 years.

Q. Question about the size of your NFLX position: On Oct 13th , you started with a 1/3 sized position. Then on Oct 15th, you bought another tranche twice the size of the 1st one. Yet, you said NFLX was still a small position for you. Could you clarify if NFLX is a full position yet?

A. Hmm, I just noticed that I didn’t put $NFLX on yesterday’s position round up. An emailer this morning noted that I’d missed $WFM in the latest Latest Positions too. I’ll send out a revised and fully updated Latest Positions that includes both later this week. And $NFLX is indeed about a mid-sized position for my portfolio, not large, not terribly small relative to most of my other positions either.

Q. What do you think of $GPRO earnings tonight?

A. Like I wrote yesterday: “Binary set-up here — if the company meets or beats estimates on the next earnings report, the stock could pop 20-30%. A miss in the earnings report and the stock could drop another 20-30%.” I would rather be long than short $GPRO into the earnings report tonight and I am indeed long $GPRO tho it is my smallest long position.

Q. With your continuing lack of faith in Pandora’s future, despite recent gyrations after the earning report, would you counsel adding to one’s short on the stock? Some quite long puts seem reasonable, no? Not a lot of premium on those in the high single-digits? How do they look to you?

A. I covered about half of my own $P short rather than adding to it. I’m still holding some of it steady though because I do think it can fall farther over time. If it were to run above $15 at some point, I’d probably re-short the shares I covered near $13 last week. I’d rather wait for a big rally in $P to add puts or add to the short.

Q. Here’s an oldie: I’m taking a bit of a bath on $SPY shorts I have from way back. Should I just sit on them or cover my modest shorts (There is a phrase for you!) and move on? (Down 27% . Not huge part of portfolio.)

A. I think it’s a good time to have some broader index and/or targeted sector ETF puts right now. The next time the $SPY is down 10% in a month rather than up 10% in a month, you should trim/sell the puts! 🙂 Hmm, you mentioned shorting the SPY, not owning puts, so…. a 27% hit on a broader index short is enough to make me think about maybe taking part of that off to alleviate the pressure but overall, yes I think it’s good to have be scaling into some hedges after the market is up 10% in a month.

Q.  And for a little humor: About your NFL position, should I just give my father-in-law his money now on my bet against the Patriots making it to and winning the Superbowl?

A. I wouldn’t count out Green Bay to win the Super Bowl this year. Green Bay vs Cinci would be my bet for the Super Bowl with Green Bay winning. I also wouldn’t count out Pittsburgh or the Colts. I’m sort of growing into a grump when it comes to the Patriots and am not sure I’m able to be objective. Glad I do stocks and not NFL-betting for a living because I find it much easier to be objective with stocks than with teams and their owners, players and coaches.

Forget having a favorite NFL team — support your local high school sports teams! 🙂 Ok folks thanks for a great chat today.