Thoughts on Apple, its suppliers, Google, Alibaba and more
Join me at 2pm ET for this week’s Live Q&A Chat at 2pm ET today at http://twc.scutify.com/members, on the TWC App, or just hit reply to this email and send in your question.
I’ve owned $AAPL since 2003, $GOOG since the IPO, and $FB since the $20s and they have obviously grown into being my biggest positions over the years. I’ve sometimes nibble on more and have trimmed along the way too. I’m not sure about the very near-term set-up, as the set-up remains that the markets is ripe for a pullback, but underinvested bulls keep a floor and upward bias…that will end at some point, but who knows when. Steady as she goes for me.
It’s just not a compelling set-up right now in our stocks or the broader markets. You guys know I will get aggressive when the pitches look compelling and I’ve been opportunistic even recently, having added Fitbit FIT call options right before it popped a couple weeks ago. But right now, it’s just not there and patience is the only really trade that’s paying safe, big dividends right now.
The broader stock markets are brushing off the $AAPL $BWLD $TWTR $CMG and other disappointing earnings last night. Doesn’t seem like it so far today at least, but we need to be ready for when the market’s path of least resistance might finally turn lower after 10 weeks of straight up action.
The most surprising thing from last night’s $AAPL earnings report is how the market was surprised by the disappointing numbers. We all knew revenue, earnings and unit sales were going to be lower, but they were lower than ever low expectations. I’m just holding my $AAPL steady for now.
I asked @RobertMarcin, who owns some of the leading suppliers of the radio frequency chips for smartphones (companies that make the chips that enable gadgets to send and receive data wirelessly) for his latest thoughts after $AAPL‘s disappointing iPhone numbers and guidance. Recall that in last week’s Live Q&A Chat ago I wrote: “Fact is that the component suppliers to Apple could get hurt if iPhone unit sales are down too much and inventory gets built in the supply chain and then the chances of write-downs hit. Are those concerns about the last 90 days of iPhone sales overblown right now? Are they already more than priced into the stocks like $AVGO and $QRVO? I can tell you that I’d rather own Apple iPhone suppliers $QCOM and $SNE than $AVGO, but I can’t say I have a feel for what’s priced into $AVGO right now.”
Marcin answered: “Apple’s outlook for this quarter was pretty stinky. Units and average selling prices below expectations and hence margins and EPS below estimates. The Apple suppliers have the ability to garner more content on iPhones as long as they can maintain pricing, which is a big if. I am not selling my only RF suppliers content gain beneficiary though I wouldn’t have a full position until we see the impact of Apple’s units shortfall in these companies’ reports and outlooks. The RF content growth is a secular story within which product cycles exist. As data speed and throughput grow, more and more sophisticated RF components required, especially the bump from 3g to 4g LTE. But after that there’s carrier aggregation and 5g on the horizon. This is just technological progress. the RF industry has consolidated down to a few suppliers making sophisticated modular solutions vs selling single parts. They play key role in adding phone functionality. Their IP is unique and valuable and doesn’t exist anywhere but in these few companies.”
I respect Robert’s opinion on these things and I know he does his homework on his positions like few others, so I’m going to take a fresh look at QRVO, SWKS, and AVGO and any other names he suggests in the RF chip content sector and will add them to the Trading With Cody Watch List.
A few other notes for you.
In the Trading With Cody Chat Room, @jakef1111 writes/asks: “I wouldn’t be surprised if $GOOG sees $700 and has a decent bounce… Do you still think it can hit $600? Has the market conditioned us at this point to be more cautious and perhaps this is a buyable pullback?”
My answer: Sometimes when people ask me a question that starts with “why” I simply answer it “Yes” to convey that there’s no simple answer at all. And so, to you, I say, YES!
$GOOG near-term is probably ripe for a pullback (like the broader market too perhaps), and the catalyst could very well be the FTC investigation and the EU anti-trust overhang. Android remains the best positioned platform for so many wearables/iOT and other form factors, plus YouTube, Google Mobile, Other Bets…there’s a lot of ways to win over the next five to ten years with Google, but again, for the near-term, who knows.
Alibaba questions?
I might look at shorting $BABA at some point as a hedge for some of my$GOOG-type longs. I’m not a fan of Chinese-based companies based in Cayman Islands trading on US stock markets and seeing comments like this underscores why I don’t trust the company: “Brands are skeptical of Alibaba’s sincerity as it joins a group fighting counterfeit goods”
http://www.headlne.com/redirec…
At any rate, I am officially adding $BABA to my Short Watch List.
Check out this crazy drone that’s soon to hit the market. So cool and at under $600 too. #DroneRevolution is still just getting started: “Meet the ex-Twitter engineer who spent the last 2 years secretly building a crazy new drone. The drone is powered by Qualcomm’s Snapdragon 2.3 Ghz Quad-Core processor. It uses sonar and a barometer to gauge its height. It has facial and body recognition.”
And energy? The entire energy sector has more hard times ahead of it, as companies up and down the chain are over-leveraged and lots more bankruptcies loom in the industry in the next couple years. Fracking companies are part of that problem. I am avoiding energy, especially balance-sheet-challenged energy stocks. Some strong balance sheet energy companies have bottomed & will thrive in years ahead, but it will be a stockpickers’ sector, not an all around boats lift.
