Cody Kiss & Tell: Gold, currency world war, NFLX vs UA 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. Regarding gold, my question is then why do you feel bullish overall with the markets and bullish on gold here simultaneously? I must be naive about gold, but the overall charts for gold vs. the markets from 2010-2015, for example, are opposite in direction so why the surge now in gold?
A. Stocks and gold can move in sync for months or years at a time. I don’t think it’s wise to consider bull markets in gold and bull markets in stocks to be mutually exclusive. There are two four year spans in the last decade or so in which both gold and stocks have rallied simultaneously. Gold has caught a bid right now in large part because: Brexit and fear and global currency wars. Japan is pissed because their currency has gone up because Britain is more tied to US than Japan. The general trend for last five years and for the next ten years has been that everybody is going to de-value their currency, so gold over time has to go higher.
Subscriber comment: Thanks for the gold charts and analysis. I don’t know what I was recalling (perhaps more of the $JNUG volatility and huge swings???) but it seemed there wasn’t as much of a correlation as what you pointed out. I should have done more research before posing that question. Thanks again for taking the time to analyze it.
Q. OK, here’s a question of the subject du jour for me these days. With your “optimism” on gold these days, which equity or ETF would you consider the safest medium-term bet if one were to go beyond merely holding coins and bullion?
A. $GDX is the safest way to invest in gold miners.
Q. What is the proper symbol for zillow, Z or ZG? What is the difference?
A. Z is class c and zg is class a. Either is fine but I will just buy z not zg
Subscriber comment: I was very interested to read Cody’s $Z analysis. One thing to bear in mind is Cody’s picks are usually fairly long horizon picks, like several years or so, and I think $Zcertainly fits in with this. A lot of the time we get pretty caught up in the day to day tremors of our stocks. Cody is great at reminding us that he is looking at his/our portfolios with a view to the next 10,000 days. I think that’s really important for us all to remind ourselves, every day.
Cody: Well-phrased, thanks!
Q. Any thoughts on FXB?
A. In a Currency World War where everybody including Britain’s central bank is trying to devalue their currency, it can be especially tough to game the moves in smaller economy’s currencies. Look at these five and ten year charts for $FXB and tell me if you think anyone has successfully tried to catch any upside in it. Has the British Pound FINALLY bottomed vs the other fiat currencies of the world? Maybe. Wouldn’t want to gamble my hard-earned capital on that though.
Q. What is the best way to short the European and Japanese bonds which have negative interest rates? Do you think this is a reasonable trade to consider?
A. There are some ETFs that you could use to trade the direction of EU and Japanese bonds, but I wouldn’t want to try to game it. Too much government control of the bonds/rates/purchasing in the EU and Japan for me to think I could successfully time the next big moves in those bonds.
Q. Cody, we’re floating about even with our SDRL puts for July. Time to exit? time to reinstate a position? Maybe riding a bottom awaiting more oil weakness. Thanks.
A. We’ve still got a couple weeks left on the SDRL puts and it’s a tiny position and I’m just going to hold them steady for now.
Q. Hi Cody, Under Armor. Thoughts on this as a wearables play and app play? They have a lot of registered users so they can track their fitness activity.
A. Let’s do the same analysis for $UA that I just did for $NFLX since both are high-flying growth stocks: $UA is trading at 50x next year’s earnings estimates, 75x this year’s earnings estimates, and at 5x sales. The stock is cheap if the company can deliver 25% topline growth for the next five years, which would put revenues at $20BB per year. At $20BB in revenue, annual earnings could potentially hit $3BB per year. Put a 15-20x multiple on $3BB and you get a $40-60BB market cap, which would imply that the stock would be double from here in five years. A 40x P/E multiple would give you a $120BB market cap, which would imply that the stock would be up 5-fold from here. That said, the reason I don’t own it is that the current valuation and market set-up just too much near-term downside risk.
Q. Skyworks – do you like it here? Lots of negativity around iPhone now, so is it a good time to dip in? Any other Apple suppliers you like?
A. $SWKS is cheap if they can meet their current estimates, trading at less than 10x next year’s earnings estimates. Currently: $SWKS has an $11BB market cap, $1.1BB net cash. Could grow topline 10% next year though analysts are expecting no topline growth this year. I like $QCOM and $NVDA better than $SWKS.
Q. Any thoughts on NFLX in general but also the impact of the Comcast deal? I know it used to be part of the portfolio. Thanks.
A. Getting $NFLX onto Comcast’s cable set top boxes is just another part of Netflix having hit critical mass as the de facto standard for TV streaming.
Q. You have probably been asked this before but I would like to know your thoughts about buying a small tranche of Netflix at these levels? Yea or nay?
A. $NFLX is trading at 95x next year’s earnings estimates, 400x this year’s earnings estimates, and at 4x sales. The stock is cheap if the company can deliver 25% topline growth for the next five years, which would put revenues at $30BB per year. At $30BB in revenue, annual earnings could potentially hit $5BB per year. Put a 15-20x multiple on $5BB and you get a $75-100BB market cap, which would imply that the stock would be double from here in five years. A 40x P/E multiple would give you a $200BB market cap, which would imply that the stock would be up 4-fold from here. That said, the reason I don’t own it is that the current valuation and market set-up just too much near-term downside risk.
Subscriber follow-up: You convinced me that the risk is not worth the “reward” Thanks, Cody
Q. What are your thoughts on LGF? They’ve gotten hit significantly since announcing the acquisition of Starz. I bought a few cheap calls. September 25’s yesterday. They’re cheap and it’s just a small amount.
A. Hmm, a September call option with a $25 strike price on $LGF means that the stock has to rally 30% in the next 10 weeks for those call options to simply be breakeven. I’ve just got a toehold in each of the three stocks from the teenager stock basket and I’m not sure the call options in these names are the right idea just now.
Q. Cody, LGF and FEYE not performing well. Any ideas? Thanks.
A. I didn’t buy them a month ago expecting them to pop immediately. But $FEYE is still up quite a bit from our purchase price and $LGF about flat, no? Lots of stocks getting hit yesterday.
Q. How goes the write-in campaign?
A. So far so good. Some dude on Facebook just posted this: “Would Cody Willard put Chuck Woolery as his Vice President? I am already writing in Cody! If you’ve never seen this video it is one of the best pro gun videos around. 7,759,749 Views.” My response: “I always wonder where we are supposed to draw the line when it comes to gun/weapon control — if we have the right to own an automatic assault rifle, why shouldn’t people have the right to own their own personal tank or their own nuclear weapon? So is a small pistol okay, but not a sawed off shot gun? Who gets to draw the line? The NRA? The Republican Democrat Regime? You? Freedom? I have a wide cross section of political friends here on Facebook. Please discuss and debate and teach me.” So I might have just lost this dude’s vote. 🙁
That’s a wrap. Thanks folks!
We are trying to improve the TWC app, and I’m afraid we released a new version without realizing it wasn’t fully ready. We’ll get the old TWC app back in the stores for you guys and won’t mess with it again until/unless you guys approve of it. Sorry for the inconvenience. 🙂
