Cody Kiss & Tell: Fitbit, Qualcomm, Virtual Reality & 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 at https://twc.scutify.com/members/. If you have any questions about our service, just email us at support@tradingwithcody.com.

Q. With zero or negative rates at the horizon and a bubble blowing bull market that is getting more dangerous, what other investment options does a middle class citizen have? I hear my friends saying housing is an investment but I don’t want to bet my money in it unless I look it as very long term investment. What are the options we have to make a decent 2 to 5% return on the cash we hold in banks ?

A. For “the options we have to have a decent 2 to 5% return on the cash we hold in banks?” I’d look at $QCOM (4% yield), $AAPL (nearly 3% yield) and maybe $VZ. As investors, we don’t have a lot of options but to try our best to ride the corporatist policies, bubbles and crashes that our central bank and Republican Democrat Regime force upon us to our own advantage as best as we can. As citizens, it is our job to fight these trends politically.

• Subscriber follow-up: Agree that 4% yield is there for $AAPL and $QCOM, but I don’t want to have a 4% yield when there is a 20% decline in a stock. In India, you can have ‘Fixed deposits’ where they give you 8% per year.
• Yes, but in India, you don’t have the world’s reserve currency, the US Dollar, as your primary currency, while you do have widespread corruption, much higher bank deposit risks, third world economic problems and so on… amazingly, it wasn’t but a couple decades ago that 8% rates in the US seemed cheap.

Q. Cody,  what is your current opinion regarding highly cyclical manufacturing companies based in the US? ISM Manufacturing PMI for February came in this morning at 49.5 vs. 48.5 estimate (48.2 last month) and this is now the fourth month in a row that the ISM Manufacturing PMI has been below 50.0 (indicating a contraction). Some people believe that we might be headed for a recession in manufacturing even if the US doesn’t go into a full recession. Obviously this affects highly cyclical manufacturers of durable goods (Ford, GM, Caterpillar, etc.) but many of those companies are already down significantly from their highs in 2015.

A. Even with a degree in economics and doing what I do for a living in the markets, I have to admit that my eyes typically glaze over when I read conventional economic commentary such as, “ISM Manufacturing PMI for February came in this morning at 49.5 vs. 48.5 estimate (48.2 last month) and this is now the fourth month in a row that the ISM Manufacturing PMI has been below 50.0 (indicating a contraction)…” simply because I don’t think there’s much value in the monthly economic releases. The longer term trend is more important and there’s certainly little reason to think that we couldn’t see a continued secular decline in manufacturing here in the US, whether there’s a cyclical component to that decline or not. I do think there’s an early stage crash that’s becoming a depression going on in the energy and commodity sectors and so that’s obviously going to impact anything connected to those sectors in the economy. All this is yet another reason to expect the Fed to reverse back to an easing phase rather than a tightening phase this year.

Q. From Email: I can never make the Q&A but was wondering if you had a VR play coming?

A. Best VR plays include: $FB, $GOOG, $NVDA, $SNE, $QCOM, $AMBA, and even $AAPL is in the early phases of developing a VR strategy. We own 6 out of the 7, so we already have a lot of exposure to the VR world. Here’s a good article that explains much of the aforementioned companies’ VR strategies.

Q. (1) Can you provide updated analysis on $RUBI after its current earnings ? They are beating and raising every quarter. (2) Why are you not considering $MSFT on your VR play? $MSFT is not the same old horse that’s relying on its office and windows anymore. Its moving towards Cloud, enterprise and Augmented reality.

A. The stock is at about the same level as it was when I wrote this about it in Stocks Wanted for 2016: “Rubicon Project has done better than most of its similarly small competitors like Rocket Fuel Inc. (FUEL). The strong sales growth of 30% is impressive and the valuation isn’t bad at 20x enterprise value to expected earnings. I’m leery that Google and Facebook will continue to squash most smaller ad companies that do things like Rubicon’s Advertising Automation Cloud, a technology platform that creates and powers a marketplace for the real time trading of digital advertising between buyers and sellers.” That said, I’d raise its rating to a 5/10 because the company does seem to execute well. My wife had us plug back in our $MSFT Xbox a couple weeks ago for the first time in a couple years so my oldest daughter could play a game or two. Hours later and frustrated that we couldn’t figure out how to get a decent game downloaded for her, I turned to my wife and said, “every time I use a Microsoft product, it’s like I get mad at the company for making everything so hard on the user.” I left the Microsoft ecosystem more than a decade ago for the Apple one and am occasionally reminded how thankful I am to have done so. Anyway, I just don’t like Microsoft products and until that changes, I’m probably not going to be terribly excited about $MSFT as a Revolution Investment, at least not in the $50s here.

Q. Fitbit…Looks like you may be close to moving on but you mentioned after the earnings call you thought it may pop to $20… I have about a 7-8% position unfortunately, from here though $20 is over a %50 move in the right direction. Looks like the street needs to see positive sales from the new products in order for the stock to move up which means that the move could be a couple of earnings calls away… thoughts?

A. It’s so tough to call a short term 50% gain in any stock with a lot of confidence, much less with one that’s being banished by Wall Street like $FIT has been. I do think it could run to $20 if the markets rally another 5-10% from their current levels, but I’m not terribly bullish overall. Feet to fire, I’d think the downside in $FIT is 20% but the upside is 50% over the next six months. Good luck.

Q. Hi Cody, I just read your trade alert on $QCOM! Is it too late for me to buy some now?

A. You’d only be paying about 20 cents more than I did a couple hours ago on my small $QCOM common stock purchase. I plan on holding $QCOM for at least a few years here if they perform.

Q. I also have one more question for you that’s been in my mind for a very long time :). You nailed the top in 2008. Why didn’t you short the market and profit from it rather than exiting out of it?

A. I had the opportunity to have my own prime time national TV show just as I’d spent most of 2007 with my hedge fund in cash and a few small positions in $AAPL, $GOOG and$MSFT. I probably could have stayed around and shorted a bunch of stocks in late 2007 and early 2008 if I’d been around, and maybe I would have made a fortune. But the experience of having my own TV show and interviewing many of my childhood idols and random celebrities and debating leading Wall Street minds and eventually getting on the Tonight Show, 20/20 and so many other experiences was just too good an opportunity to pass up. I couldn’t very well run a hedge fund and simultaneously launch a career in an entirely new industry, so I chose to take the TV show and focus exclusively on that while the markets crashed. All that said, some of the timing was luck, I am sure!

Q. Cody, any reason as to why $FIT can’t get any lift?

A. My best guess why the stock remains in a funk is that the market has no faith that $FIT can meet this year’s earnings estimates.

Q. Is there any news on GWPH? thank you!

A. No news on $GWPH that I’m aware of, but that sure is ugly and we’ll take it.

• Subscriber follow-up: Is there a point where you would cover? Thanks
• I’ll probably cover another 1/3 tranche of $GWPH in the low $40s or high $30s or so.

Okay folks, that’s a wrap. Thank you!