Greed’s back baby, Why we trim, Gamestop vs Netflix and more

Here’s the first half of the transcript from this week’s Live Q&A Chat. We’ll send the second half out later today.

Let’s hit it. To start off, as usual, I’ll run over here and just check out MarketWatch, Wall Street Journal and see what the stocks are doing as I start my call. Through the roof. Up and up and up ever since last, what was it, last Thursday. A week ago today, the market was down 400 points, intraday the Dow was. We’re up more than 1000 points since then.

Look, in the grand scheme of things, what is the whole idea behind investing? Why do you risk your hard earned capital or inherited capital, wherever you got your capital. Gambled capital, where you luckily won your capital, I don’t care. But the point is, if you’ve got capital, why do you put in the stock market? Why do you put it in Bitcoin, why do you do anything with it? Because you’re trying to get a return on it. But beyond that, it’s for security. It’s so you can sleep at night, so you can take care of your family, you can eat, be clothed. That is why we have money, that’s the whole point, right?

Tie this back to the stock market where we are in the cycle is we’ve run the stock, the Dow Jones itself has run from 6000 at the bottom in 2008, at which point, I wrote an article on Wall Street Journal called Don’t Panic Now That We’re Here, It’s Time to Buy. That was 10 years ago though. We’re now up from 6000, it’s quadrupled to 24,000 plus now. I still own stocks and I still plan to own stocks and I’m still mostly bullish but I’ve been trimming stocks today. Nvidia, which I’ve owned for two years, SolarEdge which I’ve owned for a year and a half. Remember, you don’t have to be all in or all out.

A famous friend originally from Ruidoso, we’ve been talking a lot about his investments lately. He reads Trading With Cody and owns Trading With Cody stocks that I actually helped him figure out how to buy with his real brokers and everything. Anyway, same conversation that we were just having that I’m talking about with you guys right here is he’s like, hey. should I be buying some more of these things. You’re writing about these things and you’re really bullish most of the time. You talk about your specific stocks. Revolution investing, we’ve got stocks have gone up 300%, 1000% or even Apple up 10,000%. He’s like, “we need more of those.” I’m like “Of course we do.” I’m trying to find the next one and I hope we have some more already in the portfolio too. That’s what I do all day, I try to find more of those.

At this moment in time, I don’t know that the opportunities are just outrageously great. Valuations are through the roof. Nvidia when I bought it was not trading at 10 times sales. The stock has gone from $30 to $260. It’s now trading at more than 10 times next year’s projected revenues. Not earnings, revenues. There’s $120 billion market cap for companies doing $12 billion in sales. It’s great, it’s growth, that’s why I bought it two years ago but we don’t have to plow into it right now, that’s why I’m trimming some of it right now. We don’t want to be greedy.

Another point I want to hit on again, is about the post I sent out this morning talking about how two months ago I was getting so many messages from emails, Facebook messages, whatever, tweets from people who were begging me to tell them it would be okay to buy cryptos, that their cryptocurrency would be okay, that Bitcoin was going to come back to 20,000 or 15,000. It was a lot of pain out there and anguish. Well, fast forward 45 or 50 days here, almost tow months in, Bitcoin and the cryptocurrencies have bounced 40, 50 percent off their lows from that moment when I was getting inundated with painful, regretful, hopeful questions about Bitcoin and cryptocurrencies. But, right now that things have bounced, it’s greed’s back. Greed’s back, baby.

The whole idea that there are hundreds of cryptocurrencies, a hundred of which are worth more than a billion dollars — Bitcoin alone is worth of more than 100 billion dollars — is bad news. These cryptocurrencies don’t have assets, they don’t have earnings, there’s no cash flow supporting valuations in these things. Granted guys, I bought Bitcoin when it was at 100 five years ago. I am a believer in cryptocurrencies and in blockchain.

But this all ties into what I was talking about the stock market too, it’s a matter of timing. Bitcoin at $100 is not Bitcoin at $10,000 today. Nvidia at $30 with a $12 billion market cap is not Nvidia today at $260 with $120 billion dollar market cap with everybody clamoring about it. Greed is back.

Look, if you’re in the stock market, if you own mutual funds, great. But maybe trim a little. Maybe just be a little bit patient. Remember 2008 or remember 2013 or ’14. We get crashes sometimes guys, even many mini crashes. If the market’s down 20%, are you going to be losing sleep at night? Are you going to be stressed out? If you are then trim a little bit. That’s my point.

It’s just that timing at this moment is probably not the best time ever to be loading into stock markets like crazy.

I’ll start off the trading with Cody subscriber questions and then I’ll take questions from friends and family and peeps over there on Facebook. Maybe some old fashioned fans. I still have fans. Used to be almost famous. Anyway, you people on Facebook, I’ll take your questions too even if you’re not a Trading With Cody subscriber as a bonus because I’m a giving guy.

Subscriber: Cody, why do you trim the likes of SolarEdge and Nvidia and Apple? You say that your investment horizon is 10,000 days, right? So my question is number one, is it to lock in profit expecting it will fall back because it is overbought? Number two, is it to raise cash for other investments? Number three, is it to pay taxes and gain support and support the U.S. government’s military machine trillion dollar debt? Four, is it to buy right sit tight? How does trimming fit into this context? Thank you.

Cody: Thank you for the question. My answer doesn’t have to be any of those four you laid out, by the way. There can be a million reasons to trim. Let me just tell you one reason: The reason is that I might be wrong. I still think Nvidia has upside but my God, when you buy a stock two years ago that goes up 700%  like Nvidia has for me, I take a little off the table. You sell 10% of that and you’ve got almost as much money as you started off with in that investment. Sell 15% of it and you’ve taken out every dollar you put in it and the rest is gravy and you’ve got six times more still invested in that stock.

So, that’s why I do it. It’s just because I want to be able to sleep tonight. I don’t want to lose sleep, and also I’ve seen already in my lifetime since I’ve been on Wall Street in two decades, so, I’ve seen two crashes. The year 200 to 2002, 2008. Those two crashes, I don’t know if I’m scarred by them because frankly I sold everything almost and cleared all my stocks and closed my hedge fund and took a T.V. anchor job at Fox in 2007 actually right before that crash. But I don’t want to lose a bunch of money and stocks do go down sometimes. It happens.

So we trim. I take my own advice. I’d been a little more cautious right now than I was five years ago when I was very aggressively buying and bullish. Good question Norman.

Subscriber: Cody, please explain the rationale for trimming a stock that I plan on holding for a long time- four to five years. I don’t panic and sell if it drops so I don’t feel there is a major problem with the company to precipitate a big drop. Why sell?

Cody: Sort of the same question that the prior question is. The mentality of these questions from Trading With Cody subscribers alone makes me bearish. I love you guys but you sound greedy. You got a stock that’s up 700%. Yesterday I was trimming AxoGen, AXGN, I bought it at four bucks less than two years ago, maybe two years ago. It’s at 44 today. Trim. I don’t know if I trimmed it yesterday but the point is I wrote about it yesterday and I have trimmed AxoGen. I didn’t trim it yesterday but I trimmed it above 40 recently and I will trim it again if it gets to 50 because it could end up that Apple has been fraudulent, it could end up that AxoGen has got problems that they weren’t disclosing. I don’t think that’s the case or I would have sold it, but anything can happen. There could be an exogenous event tomorrow that makes the stock market crash 30%. There could be solar flares.

I don’t know man. You just don’t be greedy. We trim when we can, when stocks are through the roof, when we own a stock that’s gone up hundreds of percent. Even if it’s doubled in the very short timeframe I will probably trim a little bit, five or 10 percent here and there. Let’s not be greedy. To quote Jim Cramer again, I don’t think I did that yet today but to quote Jim Cramer as I often do because he was a big influence in starting my hedge fund and learning how to invest and even though I disagree with him on all kinds of specific stocks and his view of the world even and whatever, point being wisdom from Jim Cramer. “Bulls make money, bears make money, pigs get slaughtered.” Let’s not be piggish. You got stocks that are up hundreds of percent, trim a little.

Subscriber:  It’s not about greed it’s about the time arising. My grandfather bought his grandkids Coca-Cola 1954. Sold the last of it in 2000. Not greed, patience.

Cody: Look, I’m not telling you to even end up selling all of it ever. When you have a stock that goes up hundreds of percent in a very short time frame and measured in years or months, you’re greedy not to trim a little. That’s my point. My opinion. Don’t be greedy people. Be fearful especially when other people are being greedy and did I mention people are being greedy right now. Down to three percent on my computer, I got to get some water. I’m going to grab a charger and a cup of water and then I will hit some more answers and questions. Should have thought it through better, huh, peeps.

Subscriber: Cody, what’s your view on GME. It’s a value play and it’s quite hated I would say. Thank you, Bob.

Cody: What’s the upside in GameStop. There’s a good example of management decisions determining the future. It all comes down to just singular decisions sometimes. GameStop was a lot like Netflix when Netflix was still sending out discs and mailing discs, DVD’s. You’d order a DVD and it’d come. You’d watch it, put in back in self addressed stamped envelope and send it back. Not self addressed but to send it back to the company.

Netflix had a visionary running the company and said, look, that’s not going to fly in the streaming world. So, he had a vision and became Netflix and now Netflix is 100 billion dollars plus company. GameStop was worth more than Netflix, several times in the past 15 years. If GameStop had ever had a CEO who made the decision, hey, we need to be the forefront of downloading digital streaming of playing and watching video games, they would have bought Twitch instead of Amazon buying Twitch and they could have been something.

What’s your upside in GameStop as it is now? GameStop suddenly going to figure out a way to sell more video games. Are you hoping the stock will just go up because it’s got a 12% dividend yield and you’re hoping that value buyers will take a liking to it even though the fundamentals have been continuing to decline.

Subscriber: Cody, why do you hate Micron’s Management team. When asked about Micron last week you said you did not like their management.

Cody: Big difference between hate and don’t like. I don’t like their management but I’m not hateful. Look, the bottom line is they’ve got too much debt and I’ve seen over the years Micron overpromise under-deliver. They’ve done a great job the last few years. The industry itself, the RAM storage stuff for computers, that stuff has been consolidated down like everything else under the Republican-Democrat regime that doesn’t enforce the NI trust laws that they’re supposed to apparently. I don’t know why we have on the books if we’re not going to enforce them. But there’s not very many vendors anymore.

So Micron might be an okay investment for that reason alone but that is because they have benefited from protections from the government subsidies, from the government and being allowed to roll up all of the competitors, which I don’t give any credit to the management for that. That’s just oligarchic stuff from Russia, like they do in Russia. So no, I’m not impressed. I like Western Digital which bought my long held SanDisk, which I made a ton of money in SanDisk before. Western Digital bought it.

Subscriber: Cody, Ciena, I remember years ago, maybe 15 years ago you liked it. Could it qualify for your shopping list these days?

Cody: The telecom supplier industry is not consolidated down enough to really benefit investors in the way like say DRAM and Micron’s this industry has. So I’m not interested in very many telecom plays. I do have a small camp telecom play for Trading With Cody subscribers know about. No, Ciena is not interesting to me right now.

Subscriber: Cody, I don’t have any shorts and would wait for you to give us a signal to short, maybe Pandora.

I’ve shorted Pandora when it was in the 20’s and it’s been crushed and I’m still holding that short even though yes I’ve taken some profits on that too.

Subscriber: Any other company you’re targeting here to short?

Yes, I’m always looking for new shorts specially with me being relatively not bullish at this particular moment and preaching caution. You’ll be the first to know Trading subscriber, [Rickma66 00:25:32]. You and every other Trading With Cody subscriber.

Subscriber: Synaptics missed earnings last night. How do you feel about it?

Cody: SYNA is the stock symbol there. I don’t own, I think I might have owned it for a year maybe a few years back. It’s mostly a touch sensor supplier company to Apple, Samsung, Blackberry, these type of companies. It’s a great business but this is always a changing business and supplying Apple and other companies like that is not always the most profitable thing. Apple really puts pressure on their suppliers like Wal-Mart does or like any giant corporation does. They put pressure on suppliers to keep the costs of the goods down so that margins can be higher. I don’t own Synaptics partly for that reason and I’ve been to Apple and I think it’s better. I’d rather own Apple than Synaptics. Here’s the question from Anish.

Subscriber: Between Blackberry and Synaptics, what are your thoughts and which one would you invest?

Cody: Blackberry is a tricky situation. If they can leverage their car presence, they’re in a lot of dashboards already, there is some potential upside. They safe and secure Android phones, the defacto standard of safe and secure Android phones. I don’t know if they’re going to pull it off though and I’m losing faith in Blackberry’s attempts to do so. They’ve got to get some revenue growth and they have not had it. I wouldn’t own either, I wouldn’t rush out and buy either Blackberry or Synaptics at this particular moment is the answer to your question, Anish.