Dividend vs growth, Scalping, “Safe” stocks, Gaming and Pot puns

Here’s the transcript from the wide-ranging, fun and sometimes funny (even pun-ny) chat below.

Q. For someone with lump sum with market near all time highs and the current politics, is it best to wait for big pullback or…?

A. I always tell people that it’s best to move in tranches and to move slowly. Maybe put 10-30% of the money to work here and put a little more to work in a few weeks and then maybe wait a little and then maybe put some more to work and then maybe wait and then maybe… you get the point. It doesn’t have to be all-in or all-out today.

Q. Good morning Cody, what do you think of scalping trading? Can it be profitable in a long run? Any experiences with it?

A. “Scalping is a trading style that specializes in profiting off small price changes, generally after a trade is executed and becomes profitable. It requires a trader to have a strict exit strategy because one large loss could eliminate the many small gains the trader worked to obtain.” Unless you think you can effectively and continually scalp a few pennies or dollars here and there for the next 10,000 days of your life (27 years), what’s the point? Too much risk in trying to do that for more than a week or two at a time maybe and even then, what are the odds that you’re going to be able to out-trade the algorithms that run the exchanges and the guys that Goldman and Citadel are paying tens of millions of dollars a year to take those pennies and dollars out of your pocket.

Q. Hi Cody I hope you are doing great, is there a real reason to buy a dividend stock over a growth stock. IMHO there is no real difference, because either the stock gets more value because there is more money or the spend the money on dividend en the stock stay’s equal. Or am I missing something here?

A. The markets look past dividends, especially in younger companies. Dividends are bit more secure than capital gains, since you get hard cash that you can choose to keep rather than reinvest in the company. But your point is valid in that stock prices are really more about future earnings cash flows than dividends per se.

Q. Hi Cody, you recently wrote that you thought the market overreacted to the tariff “agreement” and are buying SPY puts. Morgan Stanley put out a report yesterday stating that last Friday was the high for the rest of the year, and they see a similar drop as last year. How does that jive with your thesis?

A. I’m not that bearish or ready to call the top in the market here. I just think I’d rather trim and add some small hedges when the markets are through the roof on tariff headlines, especially since we were “cool” enough to buy stocks and cover hedges when the markets crashed on tariff headlines.

Q. Starting a small IRA for my early teen kids. One or two stocks you would put in there that will offer most appreciation but also “safe?”

A. Tough question, of course, but let’s try to answer. QCOM, though it has a lot of shorter-term litigation risk, is probably a pretty safe stock to own for the next 10-20 years. Maybe CSCO, AMZN and/or GOOG too.

Q. What is you take on gaming socks, e.g. TTWO?

A. I like the gaming industry as there seems to be no end to its growth and addictiveness. But I have a hard time believing that the old business models of nickel and diming your base of players that’s been utilized by TTWO and the other giant video gaming companies for years — are going to be able to survive in the new world of subscription services that Apple and Google and others are rolling out. I’m short GLUU by the way, because it’s crappy games that nickel and dime people to death look like they’re in total collapse mode. I do think there are ways to profit on the move to gaming subscription models with no loot boxes and paid-for upgrades, but I’m still working on finding some pureplays that will benefit rather than get hurt by the move to subscription.

Q. Cody, WORK back below $25. Out of all your picks, is this the biggest screaming buy at this time?

A. I like WORK and SQ and TWTR and TSLA and UBER and maybe one or two others about equally.

Q. Thoughts on VFF? I own some… am I wrong?

A. I’m not a fan of VFF. I mean, they are basically just contributing their “expertise” in growing tomatoes over to pot farm joint ventures. Look at the long-term chart of this stock and you’ll see it was a sub-$1 penny stock for many years before they started a pot business and got a pot premium. I’d rather own CGC or CRON or GWPH than VFF any day of the week.

Q. “Expertise” in growing tomatoes over to pot farm joint ventures. Nice pun.

A. Haha, it was truly no pun intended, but maybe the grass grows greener on the joint venture side (pun intended that time).

Q. You mention QCOM. Will their 5G chips be in laptops too?

A. What are these “laptop” things you ask about? Oh, you mean those old fashioned computers with keyboards? Yes, I suppose QCOM 5G chips will be in some of the 100-200 million laptops sold each year in a few years. But laptops are going to continue to fade in importance as computers interact with human voice and motions more than letters on a keyboard.

Q. Hey C.W, I got an ask you anything question. I’m 44 y/o and worked for GE and will be offered a pension buyout. What to do? I don’t know the terms quite yet, it was worth 1K a month “at normal retirement age. Wasn’t expecting this. I also have a better union pension that shouldn’t be effected as it seems more secure right now. What would you do?

A. My short answer would be that I’d try to get every last hard dollar out of GE asap and wouldn’t want to leave any capital with or keep any commitments from them. Doug, I know that you’re a long-time Trading With Cody subscriber whom I’ve met in person at least a couple times. Why don’t you email me when you get the terms they’re offering and let’s spend a few minutes on the phone discussing.

Q. Thanks Cody, will do! They want to payout in December.

A. Good luck, don’t look back. Talk soon.

Q. Do you have intentions to sell a little of you Tesla stock’s because of the financial results for Q3 2019 will be published next week? I am asking this because Tesla tend to go lower after reporting a loss. Elon said there is a chance on a Equal quartal. Which means it is either going to be a loss or Equal, which means the odds are in fever of that the stock is going to be down next weak.

A. Yes, I can see trimming 10% of my TSLA or maybe selling a few TSLA call options, maybe right around the current stock price’s strike prices. Then again, maybe the market is also expecting the stock to sell off again after the next earnings report as it has the last few earnings report — and maybe the market is already expecting a loss or a breakeven quarter at best, which would mean that if the company were to maybe actually recognize a profit because of strong sales, margins and the ability to recognize some of their Full-Self-Driving deferred revenues this quarter (because they released Smart Summon to hundreds of thousands of customers they should be able to recognize some of those deferred revenues at very high margins) — well, maybe the stock just might pop on a decent report.

Q. How is Tesla self driving revenue deferred? I paid my 6k up front when I bought the car.

A. So Tesla recognized your $6000 payment as cashflow but not as revenue. What Is Deferred Revenue? Deferred revenue, also known as unearned revenue, refers to advance payments a company receives for products or services that are to be delivered or performed in the future. The company that receives the prepayment records the amount as unearned revenue on its balance sheet as a liability. Deferred revenue is a liability because it refers to revenue that has not been earned and represents products or services that are owed to a customer. As the product or service is delivered over time, it is recognized as revenue on the income statement.

Q. You’ve got 5 votes for the Rock n Roll Hall of Fame. Who’ve you got?

A. Five people have already voted for me? My gosh, I knew my band The Muddy Souls was big, but I didn’t know we were that big. Oh, wait, you mean I get to vote 5 times. The 2020 nominees are: *Pat Benatar *Dave Matthews Band *Depeche Mode *The Doobie Brothers *Whitney Houston *Judas Priest *Kraftwerk *MC5 *Motörhead *Nine Inch Nails *The Notorious B.I.G. *Rufus featuring Chaka Khan *Todd Rundgren *Soundgarden *T.Rex *Thin Lizzy. I’d vote for, because of their influence on rock, in alphabetical order: Pat Benatar, Depeche Mode, Motorhead, Todd Rundgren and T. Rex.

Q. Good morning, taking a look at the tariff situation, do you have any companies on your radar that could spike up with a more solid agreement over the next month?

A. Maybe QCOM. But that’s not my style, trying to game that.

Q. I hope all is well! I know you’re not a big REIT guy but would you consider comm tower REIT CCI a good income option to take advantage of the 5G infrastructure buildout and especially since it’s come down off it’s august highs?

A. It’s only down about 10% from its August highs, which isn’t much relative to most other highflying tech stocks that got hit harder than that. A 3.3% dividend yield for a REIT isn’t very exciting, but this one has a tech flavor and a 5G upside potential to it. I’m starting to think 5G is going to be threatened SpaceX’s Starlink satellite business and that keeps me from getting interested in CCI at these levels. Maybe if the yield gets above 5%, I’d be more interested.

Q. Thoughts on ISRG. Robotic surgery seems revolutionary and will continue to be so.

A. I should have owned ISRG since I first recommended it in The Robotics Revolution book I wrote in 2014. It’s a great company, but it’s always overvalued and I’ve never gotten into it.

Q. Morning with the China deal what are your thoughts on JD and BZUN i have owned both for a while.

A. I’m not sure there’s much of a “China deal” yet and both have popped recently, so I’ might be a bit shorter-term cautious on them. Longer-term, I like JD a lot and own it. I don’t know BZUN as well right now.

Q. If you have time, would love you to look at BZUN. Been invested in them for a couple of years. Obviously China is hurting now but they are similar to SHOP except their target now is BIG companies. Their clients include Microsoft, Starbucks, Nike etc. Gotta figure if companies like that are investing in BZUN, so should I.

A. I will look at BZUN in depth this week and let you know if I buy it.

Q. Better chance of Amazon being $1600 or $1900 in 3 months?

A. $1900.

Q. Cody: Good morning! You said you’re short GLUU, for what seems like good reasons. Is it too late to start a short today would you say? (It’s even up a notch.) Thanks!

A. Be careful, but yea, I can think of worse ideas than shorting GLUU when it’s up because of inclusion in an index (BTW, it’s replacing SEDG in the index, because SEDG is moving into a higher market cap index).

Q. What do you think of CSIQ? Might be a better play then SEDG?

A. I like SEDG’s technology better.

Q. Who wins the 2019 World Series?

A. Honestly, I haven’t read a baseball headline much less watched a baseball game all year, since the home run derby via juiced baseballs started this season. I don’t even know who’s left in the two series, other than having seen an ad for the Yankees and Astros (I thought the Astros were in the National League…did they switch leagues? I don’t care enough to google it to put the answer in this answer). Family, family, bitcoin, pot stocks, unit sales, EBITDA, rock n roll, golf swing mechanics, family, family, family, NFL, NBA, politics…these things are higher in my mind than the corrupted pro baseball tournament these days.

Q. Yankees of course. Cody is a basketball player btw.

A. Technically, I used to be a basketball player. I haven’t played a real basketball game, not even a pick up game of 3 on 3, in years at this point. I’m trying to become a decent golfer for the last 18 months tho. It’s harder than basketball.

Q. Corrupted baseball tournament? NBA is worse by far.

A. Watching Major League Baseball play with juiced home run balls in 2019, would be like watching the NBA play on 9-foot goals. MLB is silly these days.

Q. Hey Thought this interesting We attach ourselves to exponential tech growth. Notice this semiconductor graph blows up starting in 2016. Why? I read – sudden cheaper mfgr costs + rise in demand, noted from NAND flash memory, and China leapfrog in purchasing/consumption. A paradigm shift painted on a graph. 3 yrs isn’t old tech yet. All else equal (it’s not) given the current plateau, growth like this must resume in support of the tech.

A. Might want to be cautious when the charts are spiked though. Just sayin’.

Q. The more I look at MO, the more I like it, as its margins, growth, strategic position, and excess assets make much better than its peers/comps while inordinately cheap vis-a-vis them. I think I read somewhere that you had sold it, so I like to hear the opposite side of my view.

A. I just didn’t feel good about investing in a company that sells addiction sticks and the JUUL exposure was the straw the broke my Camel’s (pun intended) back.