Cody Kiss & Tell: Long bottom in energy, MBLY, FIT, foreign stocks, 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 at https://twc.scutify.com/members/. If you have any questions about our service, just email us at support@tradingwithcody.com.

Q. How do you see market momentum? Time to trim, nibble, wait?

A. I notice that some bears and shorts are starting to throw in the towel and that might very well set this market up for at least a little bit of a pullback, something we haven’t seen in two months. The stock market sure is getting overextended, but then again, so many under-invested longs and in-pain shorts are still positioned wrong. I’m afraid I don’t feel like I’ve got much edge on the market’s current “path of least resistance” and that’s partly reflected in how my portfolio is currently positioned and the lack of trading I’ve been doing lately.

Q. Do you see the price of gold increasing substantially over the next 5 years?

A. With the Central Bank and Corporatist government that run every major developed economy doing everything they can to devalue their fiat currencies….yes, I do think Gold is headed quite a bit higher over the next five years. Maybe could even hit $2000 per ounce over that time frame. But that’s not something I’m trying to game. I just own my gold coins and bullion and expect that someday before I do in the next, say, fifty or so years, they will be worth 5-10x what I paid for it.

Q.  Is it too late to get on the $FIT common AND/OR options train right now? Also, is $FIT really a long time play given $AAPL‘s fitness stuff on their watch? Aren’t both companies playing to the same demographic?

A. The FitBit is a fitness-first wearable, while the Apple Watch is a broader application wearable. $FIT‘s products can be 70% cheaper than the cheapest Apple Watch. I don’t like to chase a stock that’s up 13% in a day, but I do think the path of least resistance is higher overall for this stock for the next few months. Near-term, it could get hit 5% tomorrow for all I know, simply to take back some of today’s outsized pop. If I didn’t own any, I would probably be taking a small nibble on some $FIT common even today, and then hope I could buy some more on a sell-off soon.

Q. Thanks again for the alert on FIT calls. I know you always say it’s an art more than a science, but where did the month of August come from as your strike date? Also, as a high-risk lark, without a lot of money invested, is there any value in considering WAY out calls — out to January ’18 — at these ($17-18) or other strike prices?

A. August would give me plenty of time for any earnings and fundamental strength announcements in the next few months based on the recent strong sales of FitBit’s Alta and Blaze products. The options weren’t terribly expensive because the stock has been crushed and hardly bounced. So the set-up for me to buy call options dated out to August in $FIT just looked like a good risk/reward so I took it. That help?

• Subscriber Follow-up: Yes, thanks for the FIT rationale, Cody. Any validity to my idea of super-long-term calls?
• Buying $FIT call options on the day it’s up 13% on the day after I just sent out a Trade Alert that I’m buying $FIT call options? Probably not something I’m keen on. Maybe next time/if the stock gets set up like that again, the January 18 call options vs the August 17 call options would be about the same.
• Subscriber Follow-up: Very fortunate timing on the $FIT calls yesterday, Cody. Thanks for that!

Q. The shippers caught my eye yesterday on price grounds. Looking through them, one stood out on fundamentals – $GLOG – operates super-new LNG ships and is doubling fleet size by 17. EPS look to grow 186% in 16 and 270% in 17 according to IBD. Any thoughts on LNG prospects?

A. $GLOG is a company that is a good example of why I don’t want to invest in overseas stocks very often. “GasLog Ltd., together with its subsidiaries, engages in the ownership, operation, and management of vessels in the liquefied natural gas (LNG) market worldwide. It provides maritime services for the transportation of LNG; and LNG vessel management services. The company manages and operates a fleet of 22 LNG carriers, including 17 own LNG carriers, as well as 5 LNG carriers for technical ship management services owned by third parties. GasLog Ltd. was incorporated in 2003 and is based in Monaco.” Monaco? I don’t know nearly enough about Monaco’s laws and economy to feel comfortable risking money on a small cap energy stock based in Monaco. Looking at $GLOG‘s balance sheet I see nearly $2 billion in debt and only a few hundred million in cash. Finally, I expect the energy sector, as I have said for the last year now, to be range-bound at these new “lower” levels for the next 5-15 years or even longer. Hope this helps!

• Subscriber Follow-up: By the way, $GLOG has 99.2% fleet utilization with $3.7bn contracted revenue and is Shell’s no 1 partner…even in Monaco
• Good luck, but $GLOG is not one for me.
• Subscriber Follow-up: The point I was making is I can read Yahoo – if you have no views on LNG, and therefore the company, don’t just quote Yahoo please.
• I thought you meant “LNG” as in natural gas. This is my view on LNG and the entire fossil fuel energy sector: ” I expect the energy sector to be range-bound at these new ‘lower’ levels for the next 5-15 years or even longer.”
• Subscriber Follow-up: I did mean natural gas. I agree on pricing, but what about LNG’s share of the supply (in the same way solar will substitute in the energy supply…)
• I don’t see natural gas taking share or revolutionizing energy the way Solar will be in decades ahead.

Q. Given that you think the energy sector will be “range-bound at these new ‘lower’ levels for the next 5-15 years”  does that mean that you think of $FSLR as merely a consolidation play? I almost hesitate to ask about DQ (foreign!) which seems to be responding to favorable coverage and earnings projections…

A. $FSLR is a Revolutionary way of generating energy and because it has such a great balance sheet while almost all of its competitors is over-leveraged that it’s a unique way to invest in energy’s future. And yes, let’s look at $DQ: “Daqo New Energy Corp. was incorporated in Cayman Islands as Mega Stand International Limited in November 2007. It changed the corporate name to Daqo New Energy Corp. in August 2009. In January 2008, it established Chongqing Daqo New Energy Co., Ltd., or Chongqing Daqo, as the wholly owned operating subsidiary in China. Through Chongqing Daqo, it focuses primarily on the manufacture and sale of polysilicon and has recently expanded into the wafer manufacturing. In addition to Chongqing Daqo, it established Nanjing Daqo New Energy Co., Ltd., or Nanjing Daqo,[4] in December 2007 in China, through which it conducts the module manufacturing business. In January 2009, it established the wholly owned subsidiary Daqo Solar Energy North America, or Daqo North America, in California to promote products in North America. In April 2011, it established a wholly owned subsidiary, Daqo New Energy Holdings (Canada) Ltd., or Daqo Canada, to expand the operations in Canada. In February 2011, to expand its polysilicon manufacture capacities, Daqo New Energy Corp. established another wholly owned subsidiary in China Xinjiang Daqo New Energy Co., Ltd., or Xinjiang Daqo.” A micro cap energy stock with operations based in China and headquarters in the Cayman Islands that has been changing its name and creating all kinds of complicated ownership chains? Do I even need to go further?

Q. Hi Cody. What are your thoughts on $QCOM and $FFIV – which took a bit of a hit recently? Thanks.

A. $QCOM got its momentum undercut by rumors that $INTC is going to steal some of the iPhone modem business. $FFIV got its momentum hit when $JNPR pre-announced that their business has been struggling for the last 90 days and they would miss their estimates. I would buy more $QCOM and/or $FFIV if they get sold off towards their recent lows in February, which is 20% lower than current levels, and otherwise, I am just holding them steady for now.

Q. So is $MBLY a good short candidate after the recent report from Citron? Citron definitely called it right in $AMBA when it was riding high.

A. I don’t like to invest in overseas companies like $MBLY which is based in Israel. Ignoring that part though, let’s analyze the stock. Analysts expect the company to grow revenues 40% per year for the next couple years and to earn upwards of a $1 in 2017. I can’t find the company’s balance sheet information easily and that keeps me from even being able to get a cursory analysis on the stock for you. I would rather be short $MBLY than long it, but I don’t plan on shorting it.

A.

: According to data from Bloomberg, $MBLY has $473.1 million (5.2% of market cap) in cash and short-term & long-term investments and no short-term or long-term debt. Analysts expect revenue of $338.2 million (+40.4% y/y) and $496.8 million (+46.9% y/y) in 2016 and 2017, respectively. In addition, analysts’ consensus estimates for EPS are for $0.68 in 2016 (+135.9% y/y) and $1.06 in 2017 (+54.4% y/y). Valuation multiples are very high no matter which ones you look at and how far in the future you look: 2017E P/E ratio of 37.7x, 2017E EV/Sales ratio of 16.4x, 2017E EV/EBITDA ratio of 28.5x, and 2017E EV/EBIT multiple of 28.2x. I also had trouble finding $MBLY‘s financial statements on my own and I had to rely on figures from Bloomberg… it linked me to a 10-K filing for MBLY for 2015 but I have to say financial information there was fairly limited compared to what you would see in filings from most US-based companies that I look at and, interestingly enough, I did a search for the term “debt” and it wasn’t mentioned once in the entire filing, which is strange even for companies that don’t have debt (even if they don’t have debt they usually mention the word “debt” somewhere in the filing).

Q. When Synaptics says they got a $110 a share bid for their company ….and turned it down. Do they show the offer and document? Otherwise maybe a chat bot made the offer! And even without this what is your take on their products? I know you moved on, but I didn’t.

A. I’ve not been following $SYNA much since I sold it as the bid for the company keeps me away. I don’t think I have any edge when the company might or might be sold and the stock is trading off those rumors.

Q. Do you know why $FB just dropped like a rock?

A. Somebody doesn’t like something that was just talked about at the $FB Developer Conference? Best place to find answers to intraday flow such as this, why $FB‘s taken a 4% hit in the last 30 minutes, is always the Scutify stock quote page where you can track what everybody is saying about $FB on Twitter, StockTwits, real-time news headlines and links, articles and analysis, charts and more. Got this there right now: How to watch Facebook’s #F8 live:https://t.co/fsxbV6jxOw + Everything announced so far: https://t.co/Rrwm4aeJvk

Okay, folks, that’s a wrap. It’s a blitz on my mind trying to answer these flurries of questions in real-time. Thanks for the great questions. I’ll be around in this Trading With Cody Chat Room off and on the rest of today and back here again tomorrow morning.