Cody Kiss & Tell: Bonds, how to short, 3D Printing and more
Here is the transcript to this week’s Live Q&A Chat. Visit the Trading With Cody Chat room on the Trading With Cody iPhone App, the Trading With Cody Android App or in the Chat Room. If you have any questions about our service, just email us at support@tradingwithcody.com.
Q. Cody, Kass is calling a “generational low” in US and global bond yields. That’s a strong call considering the “generational” tag. Do you agree? Thanks.
A. I love Doug Kass personally, as he has been a good friend and contact in the hedge fund world for me even when I was just starting out. That said, I do think he’s been bearish pretty much for the last few years as he has been during other bull market phases and I’m not going to base my analysis or positions on his theories and analysis.
Q. Is this the time to trim everything, since everything is winning and the S&P is at a top?
A. You see me trimming several positions over the last couple days…:)
Q. Cody, you have 14 longs and 7 shorts in your portfolio. Can you give me some idea how that works out dollar wise? I presume your long plays are larger than your shorts, but that may not be so. Thanks.
A. Yes, you are correct that my longs are quite a bit larger than my shorts, in part because some of those longs I’ve owned for many years from much lower levels and they’ve grown into very large positions.
Q. Any thoughts on adding to your shorts in $P or $HUBS
A. Yes, I’m considering adding to both the $P short and/or the $HUBS short position around these levels.
Q. You mentioned possibly adding to your $P short but I always get a bit concerned trying to short stocks that could be a takeout candidate. My example would be $TWTR. I don’t really want to own it right now until I get more clarity but I wouldn’t want to short it either.
A. I just don’t think $P is up for sale and I don’t think there are many folks who would want it. But having someone acquire the company you are short is always a risk when you short any stock.
Subscriber follow-up: Following your thinking what price range would be your out on the short of $P?
A. I plan to just stay short $P unless I ever see them figure out a reasonable way to generate earnings. Analysts expect Pandora to grow its topline nearly 20% again next year and I don’t expect that to happen either.
Q. I guess my question has to do with my own uncertainty as to when to exit a short. I did short $HUBS at 51 a while back and covered at 45. For me it was a nice short term gain and I was happy with that trade. I am always afraid to stay in too long on shorts. Any advice on how to look at it?
A. I know a lot of folks who can only picture shorting a stock as a short-term trade. Not sure why that’s the case. At any rate, you’ve seen me short $AONE at $10 years ago and ride it til it went bankrupt. You’ve seen me short $VRX at $170 last year and I’m still short some of that one. Same with the $P short position that I’ve had since it was near $20 a year or two ago at this point. On the other hand, you’ve also seen me short something and cover it when it went too far against me, such as $MS a few years ago. Hope this helps.
Subscriber follow-up: It helps a lot. I think I am one of those who shorts for a shorter span. I guess I am a bit chicken on the short side but I am learning and appreciate all your help. I have done well listening and continue to taking my time to buy or short and be cautious. Again, thank you for all the good information.
A. Being cautious is always a good theme for your money.
Q. I have purchased quite a bit more $GOOGL, because I do believe it has been moving sideways for about a year, and it could catch up to the growth the rest of the market has experienced. Even if there is no really significant/immediate growth, I think $GOOGL is a good buy and hold regardless.
A. I get the logic of buying $GOOG while it’s underperforming and have done so a few times in the past. Including here in this example I just found from 2010(!) when Google was trading at $225 (split adjusted): “my single favorite trading idea for now into year’s end is simply buying Google calls with a $500 strike price that will expire sometime in 2011. Google’s set to explode as earnings leverage increases, as its search takes yet more market share, and as mobile ads and Google TV and more come together for the company.” That said, seems almost too easy to buy $GOOG yet again when it’s underperforming for it to yet again catch up to the markets. Personally, I’m just holding my large-ish $GOOG $GOOGL common stock positions steady.
Q. Do you feel the bar has been driven low enough on Apple for this quarter earnings that for once in history we might actually get a run after earnings because the news wasn’t as bad (the old bad news being good news thinking) and a turnaround could be coming into the 7 release and into 2017? Usually, Apple never does good enough at earnings and the stock drops but I feel this finally might be a time to buy going into an earnings release.
A. Over the last 13 years of owning $AAPL from $1 a share to $95 I have seen $AAPL crash OR rally 10-20% or more after earnings report. I do think $AAPL will reach close to $130 by the end of this year or into next year, and I’m holding my long-held large-ish $AAPL common stock position steady.
Q. I feel like print media is a dying industry and the last players standing are the ones that had enough money left to buy out their competitors that were in worse condition in order to create the illusion of growth. Can you give me your thoughts on shorting a printer like QUAD which has recently run up big?
A. Nice find. $QUAD has $1.3BB debt to match its $1.3BB market cap. The stock has gone from $7 to $25 in the last few months. Revenue is expected to decline this year and next year. On the other hand, the company does nearly $5BB in revenue per year and could kick off a couple hundred million in cash flow next year. I’ll put it on my Watch List as a potential short target. Thanks!
Q. What are your thoughts on FIT going into the next ER? Thanks.
A. Pricing for $FIT Fitbit products seems to be stable and you don’t see huge discounts on them anywhere. Fitbit products continue to dominate the Amazon best seller list. I plan to hold my $FIT into earnings on August 3 but will have more feet-to-fire analysis/predictions for the stock into earnings as it gets closer.
Q. Cody, I’ve not been watching the bio/Pharma sector lately, but I’m taking a new look: with the IBB short rated at 7 (and with other shorts in my portfolio but the SPY puts about to go to That Great Red Ink in the Sky), would you consider now a good time to start tranching in on IBB or is there a “stronger” short/put to consider? I mean within the sector.
A. Yes, I’ve been considering buying a round of a few puts on the $IBB, dated out into September or November or something and with strike prices maybe 5% lower than the current quote.
Subscriber follow-up: RE those IBB puts and your answer above. A strike 5% below current price is about $256. What looks better to you in terms of risk/time premium, September or December? (There’s no November for some reason.)
Probably the December puts, as December will cost you more, but gives you an extra 90 days than the September ones. Remember that it’s a hedge though.
Q. What are your thoughts on oil? We seem to be in a 45-50 range and a close at 44.86 today makes me think 40 is in play before 50 again. Thoughts?
A. I think oil’s going to be stuck between the $30s and the $50s for the next year or two. I don’t know about the next 10% move tho. 🙂
Q. If you needed to raise some money now, would you sell some $FB OR $AAPL, they are both my LARGEST POSITIONS THANKS TO YOU.
A. If I needed to raise some cash from $FB and/or $AAPL positions, I’d trim a small portion of each instead of choosing one or the other. Even if you just own a few hundred shares of them, nobody’s going to judge you for selling a partial lot. 🙂
Q. I was reading the report from Alcoa. They mention increase demand from metal powders that go into 3D printers. Should we get ahead of that? Or wait and see? AMAVF is in the space as well. Not sure if you have time to take a look. Not sure what else is out there in terms of suppliers?
A. Maybe $AA itself is the best way to play the metal powder space, but the $10BB(!!) in debt there makes me sick to my stomach. How much of that $10BB has been due to stock buybacks and executives bonuses, etc? Looks like they were spending billions on stock buybacks when the stock was 4x today’s price, back in 2006 and 2007. Sigh. $AMAVF is a smaller cap based in Sweden, but looks interesting as a 3D Printing play. Need to find some numbers on its market cap, revenues, etc. ($AMAVF Yahoo Finance Profile).
Q. I also have seen UA and Nike trying to take advantage of 3D printing. What does it take to get the adoption of the technology turn into profits and rev growth for $DDD and $SSYS?
A. $DDD and $SSYS are pureplays on the 3D printing revolution, but I’m worried that other larger players or upstarts that are just getting going with a clean slate might keep these two companies from ever being good investments.
Q. You still have $SNE common stocks.? Correct?
A. Yes, still own Sony common stock.
Q. Regarding the Echo, Geeze. Apple fell behind the curve on this one. This should have been their product.
A. Yes, I agree. A few weeks ago I wrote: Amazon is becoming the new Apple. Jeff Bezos is the closest thing to a Steve Jobs running a public company today. The valuation is scary and I wouldn’t be a big buyer of Amazon at these levels right now, but it’s a must own stock as long as Bezos is running the show. PS. I love my Amazon Echo and am ordering more for friends and family.
Q. Hola Cody, thanks for your understanding of Pokemon hysteria .. I do not play. About FSLR any insights into the cycle that this stock and other solar energy stocks are being taken down by ?
A. I’ve been saying for the last year that $FSLR the stock could get hit by energy’s collapse and that I plan on holding it through that volatility/decline as a long-term investor.
Q. I have done some more homework on AXGN and having worked some (as a massage therapist) with folks dealing with spinal cord trauma and nerve damage — it is revolutionary!! What do you envision for this companies future …to be bought out by JNJ? Thanks again for both your insights and desire to share on many levels your life! I am committed to keep learning about being a better investor and a decent human being. We are living in challenging times.
A. As I wrote when we first bought $AXGN last summer: “Obviously the company could also end up being swallowed by a larger competitor too and they likely would be open to selling at the right price along the way. High-risk, small cap biotech investing is not for the faint of heart and not suitable for a large chunk of your money. But I’m going to nibble a tiny flyer here of this stock to hold for the next 3-5 years at least. And I’ll look to add to it especially if the stock continues to sell off” ($AXGN article).
Okay folks, that’s a wrap. Thanks!
