Trade Alert: A QCOM sell & two tranche buys

Morning folks, I’m baaaack. Crazy trip to Boston, NYC and back again, and I have lots of stories to tell you, names to drop for you, and insights about the economy to share with you. First things first though. Let’s catch up on some trading and our stocks.

Do you realize how few newsletter writers, analysts, pundits and traders have the wherewithal to turn from bearish to bullish when the markets/economy dictate doing so? And just how few of those have actually successfully caught the 2002 bottom, the 2007 top, the 2009 bottom and have been riding the current Bubble-Blowing Bull Market throughout? Most of my Trading With Cody subscribers have actually been reading me, subscribing to my services, or casually following my analysis since back in 2001 or so when I first started publicly writing about my trading/investing and analysis at TheStreet.com, Financial Times, WSJ and so on. We’ve caught some amazing short-term trading swings over the years too.

But even those long-time followers and certainly those of you who have joined Trading With Cody over the last few months or the last year or so can grow frustrated when our portfolios don’t go up every day or, as is the case lately, I’ve been adding a few new longer-term Revolution Investing stock picks while having missed a few near-term trading opportunities. As a Trading With Cody subscriber noted in the chat room over the weekend:

“I remember a month and a half ago (12/1/16 to be exact) that we had a small correction and Cody sent out a list of target buy prices for GOOGL, FB, AMZN, NVDA, QCOM, etc. We got close to many of these prices but didn’t actually hit any of them and he didn’t buy any of them. The stocks then rallied significantly from there. Example: Cody’s target on FB was $110 to buy. I think FB hit like $112 or something. Now it’s around $127. I didn’t buy then because I was relying solely on Cody and his buy target prices. The issue is that he has a full position in FB and his FB buy target price is going to differ from mine (his will be lower as he needs more incentive to build out a position that’s already full, is my guess, and more incentive means a lower buy price). This is an inherent issue with this service, in my opinion. I’m wondering if there’s a way to address this? I mean if Cody had say 1/2 a full position in FB, like me, maybe his buy price would be $115? That’s what I’d like to know as a subscriber. What do you all think? Thank you.”

Two main points I want to make: I am also frustrated with myself for not nailing all those bottoms and catching those stocks before they popped. On the other hand, how many other places were even telling people to buy those stocks when they were down and I was out there giving you price targets that got within 2-3% of catching the exact bottom in all those stocks you mentioned?

I expect myself to do better with my trading than I have been lately and I do think we’re going to get some great pitches this year that I’ll be swinging for the fences with.

I’ve got a couple stocks I want to nibble on this morning. I’m adding another 1/3 tranche of Gigamon today. The stock got hit because the company’s going to miss analyst estimates for topline growth by 5% or so. Remember when I wrote up my original analysis on it, I’d mentioned that two distributors accounted for 60% of GIMO‘s total revenue YTD and 64% of its accounts receivable in the last quarter, which means the company has customer concentration risk. I expect that one of its two distributors had a hiccup of its own last quarter and that is what hit Gigamon’s topline over the last 75 business days of last year. I think 2017’s estimates are quite attainable for the company and that gives us a chance to get another tranche here.

I’m also going to nibble a little tranche of TheStreet TST. Nothing new there and remember that it’s a very risky small cap stock that is being valued by the stock market at just about equal to its net cash balance, meaning the market is saying the company’s businesses have almost no value at all. Also important to note is that the company received a potential delisting notice from the Nasdaq. The rule states that shares must close at at least $1 per share for 30 consecutive days to maintain compliance. TheStreet’s last close above a $1 was October 31. The company has until June 12, 2017 to close at or above $1 for 10 consecutive business days to regain compliance. I expect the stock will be above $1 for by June but even if it were to be delisted, I think we would still see gains in our shares wherever they might be trading in two or three years if the company can figure out how to kick off a few million dollars of cash flow from the $50-60 million revenue run rate they’ve got. I’ll be adding a tiny tranche here which, along with any Trading With Cody subscriber purchases, could pop this volume stock, so I won’t be paying more than 85 cents or so if I am to get filled. Again, TST will still be my smallest position.

First off, let’s talk about Qualcomm. $QCOM‘s a conundrum at best. They’re being sued by a huge customer…and it’s not just anybody, it’s the one and only $AAPL suing $QCOM and claiming some pretty bad stuff in court documents.

In the lawsuit filed in U.S. District Court for the Southern District of California, Apple accused Qualcomm of overcharging for chips and refusing to pay some $1 billion in promised rebates. Apple said in its complaint that Qualcomm withheld the rebates because of Apple’s discussions with South Korea’s antitrust regulator, the Korea Fair Trade Commission.

“If that were not enough, Qualcomm then attempted to extort Apple into changing its responses and providing false information to the KFTC in exchange for Qualcomm ‘s release of those payments to Apple. Apple refused,” Apple said in its lawsuit.

In a statement, Qualcomm General Counsel Don Rosenberg called Apple’s claims “baseless.”

“Apple has been actively encouraging regulatory attacks on Qualcomm ‘s business in various jurisdictions around the world, as reflected in the recent KFTC decision and FTC complaint, by misrepresenting facts and withholding information,” Rosenberg said in the statement.

“We welcome the opportunity to have these meritless claims heard in court where we will be entitled to full discovery of Apple’s practices and a robust examination of the merits.”

Qualcomm’s just become an outright battlefield of a stock. We’ve owned it for just about a year now and have taken profits when it was higher, received another 5% in dividends and are still up a little bit on our shares too.

I went back and looked at what I wrote in my most recent Qualcomm stock update and Revolution Investment rating and it was this:

“Qualcomm‘s got a lot of moving parts but the new mobile chips are great to see as they continue down their technology road map. I’m just holding my Qualcomm steady for now, but am still quite bullish on them long-term, obviously.”

So the upshot of all this is that it’s time to let go of a six-rated stock that’s just gone to war with a customer that accounts for more than 10% of its revenue.

I’m selling my Qualcomm, starting with letting go of half of it today and the rest of my share tomorrow.

Thanks for being a part of Trading With Cody and stay tuned — this year is going to have a lot of twists and turns and I’m here to help.