Cody Kiss & Tell: Hedging, staying cool, Nvidia insights and more
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Q. Hi, Cody. Happy New Year. Is this an answerable question without a lot of personal-ownership specifics? With a modest portfolio consisting largely of TWC longs and shorts, currently I have no hedges (other than the shorts). Sadly, recently expired QQQ and XLF puts (sigh) at a fairly sizable loss. Any recommendations based on your crystal ball on where to begin (again) to put in some hedges –which ones and (I’ve asked this before) are there any guidelines as to % of total portfolio to hedge? (I always wondered what a “tiny” hedge did for anyone; my past ones were above tiny.) Thanks for all of that wisdom!
A. A “tiny” hedge might be a 0.25% or 1/3 of 1% position, I suppose. Maybe for a 25 year old kid making big money and with a big appetite for risk, a 1% position might be considered tiny. Anyway, I’m not in a rush to add more hedges just yet, as you know. And also, as you know, I’ll definitely let you knowif/when I do think it’s a good time to start adding more hedges.
A different subscriber follow-up comment: Every time I try to time the market and hedge I lose. Now if nervous, I raise some cash to comfortable sleeping size best hedge for me at least.
Cody’s response: Great advice for the more risk-averse or those who just don’t want to trade/short/buy puts: “Now if nervous, I raise some cash to be comfortable sleeping. That’s the best hedge for me at least.”
Q. Hi Cody. Got any tips for ignoring all the negative Eddie articles in stocks that one wants to hold over multiple years, provided the story or earnings doesn’t change one’s reasons for doing so? Restating question. An example of this would be IBD’s technical analysis on $NVDA – they said it had a blowoff top and could drop 40% – 50%. Then a couple of days later, Citron came out with their piece on NVDA and then it seemed liked everyone at SA piled on. It was crazy, felt like a huge negative campaign against NVDA and started to make me doubt why I bought the stock in the first place (this is a 3 – 5 years hold). So, got any tips on how to tune out the noise so I don’t second guess my position and panic sell into all the negativity? And speaking of IBD, how much credence do you put on technical analysis of stock charts?
A. Don’t read IBD, don’t read message boards, don’t read analysis at $NVDA. That would be the easiest way to avoid being affected by those things. I don’t have any faith that a widely-read newspaper’s charting methods provide any meaningful long-term edge to anyone but the owners of the paper. I like IBD and know people who work there. But I wouldn’t want to move my hard-earned money based on anything I read there. I like Seeking Alpha and sometimes read articles there with good information but I am pretty good about not taking anything I read there too seriously either.
Q. I read a Seeking Alpha article regarding warrants GS is holding regarding $NVDA stock. Seeking Alpha spins it as a big negative for NVDA stock holders. Any thoughts? Thanks.
A. Bigger shareholders and long-term investors generally price that kind of dilutive warrant possibility into their valuation metrics long before they are exercised. Remember the big issue with Steve Jobs and the backdating of $AAPL options ten years ago? The reason that mattered so much to investors like me is that it changed the valuation metrics because we weren’t actually aware of how many shares and at what price executives like Steve had the option to buy. The reason the backdating of the options with Apple/Jobs was a big deal and this $GS/$NVDA warrants deal isn’t is precisely because Apple/Jobs basically hid their actions while the Goldman Nvdia deal has been in filings since day one years ago.
Q. I’m one of the few that didn’t jump on the train with NVDA and just couldn’t engage on the way up. Time for a ‘toe hold’ ? And leave room for a nibble around 90? I’m so emotional and feeling left out 🙂 🙂
A. $NVDA‘s a tough one just now, but you have the right mindset as you think about it. I think maybe a 1/5th starter position and give yourself some time to nibble another 1/5th or so over the next week or two and then hopefully at some point you’ll get the chance to nibble another 1/3 or so closer to or even below $90 if there’s some big pullback/market tanking at some point.
Subscriber follow-up: Thanks for helping to see us safely to the other side, Cody!
A. Remember those two most important words — “BE COOL”.
Subscriber follow-up: Thank you so much for this, Cody! Your advice will save me a lot of time, too, while reducing the worry! You are sooo good at this, the ability to stand pat beyond the noise.
Q. One commentator I read said that 2017 will be more of stock picker’s (Peter Lynch-like) market than has been the case recently, while others are chronicling the woes of large hedge fund managers last year, and still others are trumpeting that buy and hold is the best strategy. Realizing that there is some benefit to all of the above, singly and in combination in the appropriate markets, do you see a clear path forward strategically?
A. I think it’s always a stock picker’s market when you are buying Revolutionary companies. 2017 will have some ups, some downs and some of our long-term, long-held stocks might not have a hard time at times over the next 200 trading days, but that’s always the case.
Q. I like the prospects of $PI going forward and I am prepared to ride out the ups and downs with the modest position you suggest. I think the radio ID tag business will just get larger as hospitals and other businesses get serious about tracking everything in their inventories on a real time basis.
A. Hospitals, retail stores, warehouses, distribution and logistics companies…yes, the market for RFID is huge and if $PI can become a/the big winner in that industry, there’s a lot of upside from here. If it fails to become a winner, obviously, it’s headed lower.
Q. Cody, how do you see $AAPL sitting currently? Is it going to turn into a bond-like stock similar to $MSFT in days gone by or do you think they have something interesting up their sleeve for the future?
A. I just plan on holding $AAPL for the bond-link dividend and slow price appreciation over the next five years or so as the iPhone recycles play out and they take share from Android slowly but surely. Anything interesting up their sleeve would be a bonus and could give us nice upside potential. But ol Timmy Cookie hasn’t exactly proven that he even wears sleeves, much less has anything interesting up them. 🙂
Q. If you had an out-sized position in $AAPL would you reduce it and put a starter position in, say $GIMO in? This is a purely subjective and personal decision, I realize.
A. Depends on what you mean by “out-sized”. If it’s 2x bigger than your next largest position, I wouldn’t freak out, but I might trim some occasionally when the stock is up. If it’s 3-5x or bigger than your next largest position, then I’d probably look to get it down and soon, simply as a matter of diversification. I don’t do well thinking about “sell this to buy that” per se. If you want to own $GIMO, as I do, I’d simply look to nibble on a starter and scale in slowly over time regardless of what you do with $AAPL.
Subscriber follow-up: Gotcha, Thanks. I understand, just seems $AAPL does not feel like a dynamic growth stock right now, and if that is what I want, should shift into something else. That’s all.
Cody’s response: It’s always possible that $AAPL breaks out and rallies 50% in the next year while smaller cap, more highly-volatile growth “dynamic” stocks underperform.
Subscriber follow-up: Sure! your words to God’s ears! but if the position itself is too large compared to the rest of the portfolio, guess it is best to trim.
Cody’s response: Probably…but then again, let’s say you’re a 25 year-old app programmer making $180k living in Austin, TX. Owning a huge chunk of one stock for most of your portfolio, which let’s say is a $100k portfolio, probably isn’t a big deal. But if you’re 50 and you’re making $180k a year and have five kids and two grand kids and have a huge chunk of one stock in your $1 million portfolio probably is a terrible idea.
Subscriber follow-up: You are right! Let’s agree to agree, OK?
Subscriber follow-up: Add 17 years and I fall into the latter category.
Cody’s response: So I’m gonna go out on a limb here and say that you don’t have a huge chunk of your stock portfolio in any particular stock.
Subscriber response: Very correct.
Subscriber comments: 1) Yeah, my profile in that regard matches yours pretty much. 2) Same for me.
Q. Any target on adding to your $GIMO position?
A. Yes, likely to nibble some more $GIMO any time now.
Subscriber follow-up: Here is an article on $GIMO.
Cody’s response: Thanks for the link. Here’s an interesting thing. Basically, the analyst surmises that the stock took at hit because: “The more recent pressure on the share price came after the company’s investor conference in which management indicated that its budding partnership with Amazon.com, Inc. (NASDAQ: AMZN) was unlikely to generate revenue until at least 2018.” That makes sense, but we should “Flip It” because that means $GIMO is expecting 25% revenue growth for 2017 WITHOUT any help from its budding partnership with $AMZN‘s crazy fast growing Web Services. ‘For 2017, Gigamon planned to make a foray into the AWS market with free licenses for small implementations of its visibility software. “We do not have any revenue expectations for AWS built into our fiscal 2017 model, so any contribution would be upside to our projections,” the analyst noted.’
Q. Any commentary on $TSLA what with all that’s happening with the car (deliveries, etc.) and Musk’s non-TSLA activities/acquisitions?
A. $TSLA is still a highly-welfare-dependent company and Musk is still brilliant. Not much more to add. I stay away from $TSLA stock pretty much.
Q. What about UA? I think I recall you saying something about the 25 dollar level?
A. Yea, I’ve been watching $UA and doing more homework on it, but it’s still trading at 41x NEXT year’s earnings and still too expensive for me to buy for now.
Q. Happy new year, Cody. Any thoughts on the marijuana stocks, such as $GWPH now that new laws are coming into effect in CA legalizing recreational marijuana use. Thanks.
A. $GWPH wouldn’t be affected by legalization. Most other marijuana stocks are scams. You’ve seen those many articles I wrote on the topic a few years ago?
Q. Any chance to do homework on $FFIV yet?
A. I still like $FFIV and obviously regret selling it. I don’t know if I can deal with my own emotions well enough to objectively analyze the stock with it at these all-time high levels. Maybe if we get a 10-20% pullback in the stock I might get comfortable enough to buy some. The topline growth is still in the high single digits and that’s not exactly “Revolutionary” kind of growth but it trades at “just” 16x next year’s earnings and less than that ex-cash. So it’s not terribly undervalued or overvalued just now. I should have just held onto it!
Subscriber follow-up: Ha. I should have held onto my couple hundred shares of AMZN stock (pre splits) back in 98 or whatever it was!
Cody’s response: This brings up an interesting point about $FFIV and all stocks: “I should have held onto my couple hundred shares of AMZN stock (pre splits) back in 98 or whatever it was!” If you’d been willing to pay up and buy those shares you sold in 98 back at any point in the next ten years, you’d still have some nice gains. Great companies that Revolutionize the world, like Amazon is/has, can always go up more…
Q. $SNE’s revenue is down from a year ago. I am not sure what divisions are responsible for the dip, but the performance this past year leaves something to be desired. Time to trim or sell? I would like to protect my profits in the company.
A. $SNE is still a great play on: Virtual Reality, Streaming Live TV, Demand for movies/TV shows, HD recording and more. Still a Japanese-based company with that risk, but I’m fine holding my own after having trimmed some on occasion as noted since I’ve owned it since it was in the teens.
Q. $QCOM announced what looked to be some great new mobile chips – no move in price today, but does this add to your enthusiasm for them?
A. Qualcomm’s got a lot of moving parts but the new mobile chips are great to see as they continue down their technology road map. I’m just holding my Qualcomm steady for now, but am still quite bullish on them long-term, obviously.
Q. I have read that $FFIV is in danger of being overtaken/targeted by $ATEN – any insights?
A. I haven’t heard anything like that.
Q. $AMBA under your add to target of $55 here?
A. I’m in no rush, but I might nibble a small tranche of AMBA soon.
Subscriber comment: I always enjoyed your time on Fox. Wish you could do something like that again.
Ok folks, that’s just about a wrap.
