Trade Alert: AMZN profits, Zen, best brokers and more
The markets just barely broke through the two year lows on the S&P 500 yesterday upon which time they immediately had a big bounce into the close and that rally continues today. We don’t have to catch the exact bottom in the markets even as we stealthily look for great pitches like we had last Friday and this past Monday when we snuck in and got some $AMZN and $NFLX call options at the lows and like we the week before with our having bought and subsequently taken big profits on some $FB, $UA and $SNE call options. Let’s continue to be defensive but opportunistic.
On that note, I’m going to sell a few more, about 1/5th, of my remaining Amazon call options today, locking in some more profits there and leaving that in cash. I’ll still have about half of them left.
Q. I do not know how this day will end, but I have learned as a follower of Cody for a while that he has a Zen attitude and patience that is something I want to emulate. Sometimes doing nothing and trading sparingly is the much better path.
A. Thanks for the kind words and yes, this is the idea! “I have learned as a follower of Cody for a while that he has a Zen attitude and patience that is something I want to emulate. Sometimes doing nothing and trading sparingly is the much better path.”
Q. “Contrarian/anecdotal tells that at least a tradable bounce is likely at hand: 1) My stomach churning actually becoming noticeably audible 2) Subscribers imploring Cody for more short ideas. 3) Over 50% of the posts discussing different ways to invest in gold. 4) Waking up at 2 am w/ an eye glued to the futures and not being able to get back to sleep. 5) Trying to reassure myself that buying is right when it just feels horrible. I’m sure there are several others.”
A. I do notice I check the futures and the overnight action in Asia every night these days. Not sure I’d want to change my market stance or make much of a trade on those anecdotes, but they certainly are bullish net/net. Great stuff, thanks!
Q. $FSLR no reacting well in this last days, nevertheless FSLR resisted the sell off from dicember in the markets, maybe traders are selling FSLR and buying others that fell much more. We must imitate or wait?
A. I own $FSLR because it has the best business model and balance sheet amongst the solar stocks and I believe that solar will be a huge factor in our future. I don’t want to sell it and buy a laggard.
Q. What do you think of PANW, FTNT and FEYE at those levels?
A. $PANW, even after this drop, is trading at 2016 40x earnings with a 30% topline growth rate projected for this year. $FTNT is at 30x earnings at 20% topline growth. $FEYE isn’t expected to make money anytime soon. If these fall another 50% from here, they’d be terrific values. But not yet.
Q. I’ve been so tempted to buy some long term calls on $FIT. What has negatively changed about the COMPANY since you first started buying the stock? My gut is that the vast majority of the sell-off is MARKET related and not company related. Thoughts?
A. I like the idea from a contrarian standpoint and because you’re right that it’s not likely the company’s fundamentals have underperformed nearly as badly as the stock has, if at all. That said, this market, as you note, doesn’t seem to have a bottom for high-beta growth stocks like this and what’s to say it won’t overshoot to the downside even more if these dislocated sell-offs continue. And there is the potential that the company’s new products fail to catch hold and inventories spike and they take a charge or something like that. Maybe a tiny tranche of long-term call options if anything, and leave yourself room to add more if it crashes further.
Q. What do you think of CRM CEO buying FIT?
A. Interesting, but not something that factors into my analysis per se: The investment may have been inevitable: Business Insider reports that Benioff has long been a champion of the gadget, gifting it to Salesforce (NYSE: CRM) employees for holidays and talking about it as wave of the future as early as 2008. UPCOMING EVENTS Book of Lists Party FEBRUARY 16, 2016 Bay Area’s Corporate Counsel Awards MARCH 10, 2016 40 Under 40 MARCH 08, 2016 See More Events “Benioff was wearing the Fitbit years ago. He was obsessed with it when no one knew what it was,” Carlye Adler, the co-author of Benioff’s book, “Behind the Cloud,” told Business Insider.
Q. What do you think of playing $ABX, Barrick gold as a short. It has gone straight up rom 7 or so to 12 with gold moving upward but I think it will test and retrace where it came from as some point.
A. The problem with that trade idea is that it requires you almost perfectly time the trade. With $ABX and the other gold mining stocks trading almost purely as a high beta vehicle for gold’s own price action, as I’ve been saying they would be…well, you’re basically making a bet that the against the Fed’s likelihood to lower rates and hint at negative rates. As you know, I’ve been saying the Fed’s going move back into an easing cycle and they’re already hinting at cutting rates, just like I’d predicted…so it’s a gamble of a trade at best.
Q. I’ve read here and there that if Cook had Musk’s charisma, $APPL would be trading higher. At least to a degree, do you think a CEO’s personality affects how Wall Street responds to their stock price? Cook doesn’t talk up Apple’s future much, while CEO’s like Musk, Bezos, and Hastings seem to show a lot more enthusiasm re where their companies have been (past accomplishments) and their future plans.
A. Interesting question. Makes me think of the great Benjamin Graham’s quote: ‘In the short run, the market is a voting machine but in the long run, it is a weighing machine.’ Bottomline, I just want a CEO who runs the company for the future and manages their finances well.
Q. What do you think of playing $ABX, Barrick gold as a short. It has gone straight up rom 7 or so to 12 with gold moving upward but I think it will test and retrace where it came from as some point.
A. The problem with that trade idea is that it requires you almost perfectly time the trade. With $ABX and the other gold mining stocks trading almost purely as a high beta vehicle for gold’s own price action, as I’ve been saying they would be…well, you’re basically making a bet that the against the Fed’s likelihood to lower rates and hint at negative rates. As you know, I’ve been saying the Fed’s going move back into an easing cycle and they’re already hinting at cutting rates, just like I’d predicted…so it’s a gamble of a trade at best.
Q. Cody, any thoughts on visa buying 10 percent of square?
A. I wouldn’t buy the stock because of that news: “Visa was an early investor in Square. A report by The New York Times noted that Visa invested in the company back in 2011 when it was still a start-up. The publication added that both Visa and Square declined to quantify the investment. As such, it is possible that Visa merely converted its investment into shares on Thursday.” http://finance.yahoo.com/news/…
Q. Would you mind recommending a few brokerages with the best proprietary and third party research. I have a TD account but I’m looking to diversify my information exposure. Thank you Cody, my thoughts are frequently with your family.
A. I don’t really use anybody else’s analysis except as education pieces. I learn and question and sometimes laugh at research pieces from any and all brokerage firms. I get a lot of research sent to me after being on TV and having run a hedge fund and I read most everything I can get my hands on but rarely use my online brokers for research itself. This article and the website in general lists the top-ranked sell-side firms with the best equity research teams: http://www.institutionalinvest… BAML is ranked #1 in the world and JPM was #2 in 2015. Usually getting a brokerage account at the bank gets you access to the research. The website is pretty informative so hopefully you will find it helpful.
Q from yesterday afternoon as a subscriber asked Cody in the chat room: I’m wondering if that news about P and the immediate spike in their price is worthy of adding a tranche to our short?
Cody’s answer last night. Holding our smallish remaining $P short position steady for now. I don’t like to game M&A potential and might move on. Ugly quarter (again) at $P just reported tonight too. That’ll help our short tomorrow perhaps.
UPDATE Friday Morning: Wow, $P down 20% today to new lows (again). After seeing that spike 10%+ on volume from yesterday’s NYT column that said there might be talks for the company being bought only to see it crash that afternoon after an ugly earnings report…well, that’s how people end up thinking this game is rigged.
