Fiber, Oil’s next move, Nvidia Softbank and more
Here’s the transcript for this week’s live Q&A in the Trading With Cody Chat Room.
Hi everybody. It’s been a long month and a half with Amaris having been in the hospital for a couple extended stays and one minor long-scheduled surgery too. I’ve also been on the road to Boston and Las Vegas during that time too. But Amaris has been back at home for ten days now and is smiling and laughing as much as ever — which is a lot, as she she is one happy baby when she’t not ill. Lyncoln’s totally into being a great big sister and she thinks it’s fun to get to travel back and forth to the hospital and visit family. Thanks for being understanding and patient as I’ve had my hands so full. I’m back full speed. Let’s have a great Q&A.
Q. We are already back to the highs… do you have any shorts in mind… i was thinking of going 3-6 mo out with out of the money PCLN puts…. heavy debt loaded consumers, from auto loans to credit cards…. with the economic numbers coming in weaker then expected and the “fiscal stimulus” that probably wont happen are we set up for a let down? Then again, corrections and sell offs are figments of our imagination nowadays
A. The problem with betting against $PCLN is that you’re betting against a great company. Find the worst travel-related play exposed to the macro trend you’re focused on and buy puts on that one instead.
Q. Another concept with potential is the huge shift to self driving cars. EV and less vehicle ownership isn’t AZO an obvious short? $AZO sure took a hit today. My guess is that the move to self-driving cars is not going to affect car ownership in any significant way for a long time.
A. Same thing with $AZO. It’s a great company. Find a crappy company in the same space and short that one.
Q. You mention $AZO is a good company. Is it a good time to scale in on this pullback or is there a possible problem with slowing auto sales and $AMZN getting in to auto parts also?
A. I would rather be short $AZO than own it, I just would rather short crappy auto parts companies than the one that’s probably best-in-class. Car ownership itself will decline in years ahead and retail car maintenance/parts is now officially a secularly declining industry. I don’t know the auto parts industry well, but maybe we should be doing some research and finding some plays to short in it, perhaps even including $AZO.
Q. Wasn’t too long ago there was grousing about $PI. Just happy we haven’t sold any. Wow.
A. Amazing move in $PI. Barron’s and others have been loving on Impinj lately — aren’t you glad we were early. I’m just riding tight with our $PI for now.
Q. Do you feel the increase in oil this past week is due to Trump’s trip to the Mideast along with possible further cuts from OPEC when they meet this Thursday? I guess the setup to that question is do you feel oil hits $55 or $45 first?
A. Take a look at a one year chart on oil and it’s been stuck in the range from the $40s to the $50s the whole time. I don’t think we can discern any rhyme or reason for the moves between the top and bottom of oil’s range for the last year and I don’t think you can look back at the last week and point to any meaningful reason for this commodity to have moved inside of that range once again. As I wrote two years ago about oil: “The fact is that if you look back at the historical cycles in energy, they can take 10-15 years or even longer to play out. As Jim Rogers used to explain to me on my old TV show, energy and commodity cycles typically last 17-20 years. We’re in year two or maybe three of the energy and commodity downturn and people think it might already be over? I strongly doubt it. Don’t forget that solar and some other renewables are going to become an ever bigger part of our energy systems and they will keep downward pressure on energy prices for decades to come too.” So I remain mostly a long-term oil bear and I would rather bet the price of oil staying rangebound and/or slowly dripping lower in years ahead. $55 or $45 next? Feet to fire, I’d guess $45.
Q. How do you feel about $AAOI? Same question for $LITE. I have the feeling that $AAOI is a better investment because too much of the $LITE hype is based on the 3G sensors for the next iPhone. $AAOI is profiting from installing fiber optics in data centers, which is a more certain play. It is a bit late in the game to go long on $AAOI, but I don’t think we would be chasing smoke.
A. I’m not thrilled about chasing any stocks that are up 3-4x over the last year or two right here right now.
Q. Glad your family situation has improved. Would love your thoughts on robotic stocks. Thinking more specifically of $ISRG, $MZOR, and $IRBT. Thanks.
A. I figured each of those robotic stocks in my ebook from nearly three years ago. I’m working on updating my analysis about them.
Subscriber follow: Thanks for the link. And I look forward to your updated analysis on the robotics, too!
Q. How do you feel about $AAOI$? Same question for $LITE$. I have the feeling that $AAOI$ is a better investment because too much of the $LITE$ hype is based on the 3G sensors for the next iphone. $AAOI$ is profiting from installing fiber optics in data centers, which is a more certain play. It is a bit late in the game to go long on $AAOI$, but I don’t think we would be chasing smoke.
A. I’m not thrilled about chasing any stocks that are up 3-4x over the last year or two right here right now.
Q. OK, then what about the optical fiber market in general? Is the change from copper to fiber worthwhile investing in right now, or is the upside already behind us?
A. I’m going to blow your mind about the change from copper to fiber. Here’s an article I wrote for subscribers from 15 years ago about this very topic. Yes, 15 years ago! “The rumblings around the pending fiber-to-the-premises buildout continue behind the scenes, and I can hardly contain my bullishness about it. Earnings season had me fielding lots of questions about what to expect from the optical stocks this quarter. But it’s important to remember that the opportunity I see here has to do with the FTTP buildout of 2004 and beyond. Although I think the ramp-up of FTTP will come sooner and be bigger than most every other analyst on the Street thinks, that means nothing for this quarter.”
Interestingly, if you Google “Cody Willard fiber” this also comes up: “TRB: When you were writing for TheStreet.com, some of your best work concerned the FTTP (Fiber to the Premises) theme. In the aftermath of the tech bubble’s burst, miles of unused dark fiber lines were stretched across the country and your thesis was that the companies who could link that fiber to homes or office buildings would be the winners. What do you see as the next major theme for the telecom industry? CW: Wow, that’s so cool that you remember my FTTP work. For the record, I was right about the fundamentals of the fiber optic and telecom economies turning around…but the stocks never made me much money. I still kick myself for the opportunity cost with my old hedge fund partners and me from riding our large position in JDSU from $2 (where I nailed the bottom in October 2002) to $5 and then back to $2 and so on for way too long. Next major theme for the telecom industry is ever lower revenues for services…we’re seeing all applications (from voice to video and anything in between) simply ride on top of broadband Internet Protocol networks.”
You might have heard that a lot of people now just watch video over the Internet, huh?
Q. What are your thoughts on Softbank’s rather new position in $NVDA? It’s 4.9%, making them the something like the 4th or 5th largest shareholder.
A. I’d rather every major investor on the planet hated $NVDA still. But realistically, somebody’s had to be buying this stock while we’ve been riding it up from $30 to $140. 🙂
Subscriber follow-up: Rock on re $NVDA!
Q. Cody… thoughts on Fed minutes that were released today?
A. None, they’re just propaganda.
Q. Are there good opportunities in the software for the cloud space?
A. Depends on what you mean by software. Amazon Web Sevices and the rest of cloud itself runs on software, so almost any large cloud stock is partly a play on software.
Ok folks, that’s a wrap for today. Thank you!
