Trade Alert: In search of new names and an Apple round trip

Most hedge funds and lots of other money managers and most retail investors have had a down year this year, as small caps and energy and the average stock is down too. Robert Marcin, a good friend, stock mentor and the best value stock picker I’ve ever known rightly noted this morning that: “The median stock in the more comprehensive universe measured by the Russell 2000 is down 9% ytd. With today its probably closer to 10%. That is rather indicative of the average stock and portfolio, I would bet. 1/3 of the index is down around 20% or more. Just goes to show how difficult a year 2015 has been, especially for small/mid caps.”

I learned long ago that we can get an edge on our career and on our portfolios by doing the homework that others won’t and working when others rest. This week, I’m working and rummaging through all the carnage away in the individual stocks in this market to see if we can find a few nuggets to nibble at.

If you’ve got a stock or two that you want me to take a look at, be sure to ask me by hitting reply to this email or in the Trading With Cody Chat Room which you can also find on the Trading With Cody Apps for iPhone and Android.

Here are four names I’ve been doing more work on but haven’t pulled the trigger on yet.

Lionsgate $LGF did the secondary recently and doesn’t get any of the proceeds, so that’s not good. But the fact is that the company already has $2 billion in net cash ($14/share), no debt and could earn $2 per share next year. I’ll dig in and take a fresh look at this one as that strong balance sheet and cheap valuation makes it interesting here.

$FTNT provides cyber security solutions for enterprises, service providers, and government organizations worldwide. The company’s growing 20-30% per year and is profitable. They’ve got $600 million cash ($3 per share) and no debt and the stock is down from$50 to $31 in the last year. The company is expected to grow earnings from 51 cents per share this year to 68 cents per share next year. Trading at nearly 50x next year’s earnings, it’s not cheap, but that growth rate is compelling.

$CAVM Cavium which designs, develops, and markets semiconductor processors for intelligent and secure networks in United States and internationally. It’s got $130 million in cash, $20 million in debt and should grow earnings from $1.50 to $1.75 next year on 10-15% topline growth. The stock’s not cheap at $65 with a forward P/E of 37 but it’s another fast growing company that might be worth digging into further.

$AMAM Akamai’s balance sheet isn’t as great as I’d like it to be as their debt nets out with the cash to a slightly negative value. The company is very well positioned as a cloud services company with their optimized network for delivering securing online content and business applications. Earnings should grow from $2.40 to $2.70 this year on 10% earnings growth. That gives the stock a P/E of 20 which isn’t bad, but it’s not a screaming buy either. I’ve had this on the Trading With Cody Watch List for a month now and would like to buy it near $40 if we ever got a chance too.

Finally, I’m nibbling some Apple common stock this morning, adding back the small tranche I’d sold back when it was near $130 per share earlier in the year. As I wrote at the time:

Not the best of set-ups right now: AAPL – I think it’s time to trim a little bit more of my own. The stock’s up about 30% in a straight line and the hype around the coming Apple Watch is growing exponentially too. So, discipline over conviction. Following the playbook. Making the hardest trade. I personally am trimming a bit of it today, about 10% of my position.

Selling Apple at that point was tough in large part because the chart was straight up and felt like it would go on forever. Buying those shares back with the stock acting like it’s in a funk and with fear rising about the stock and the iPhone and the consumer and China and so on. We sold some when others were euphoric, now we buy some back with others are fearful. I don’t know if the stock bottoms here or not, but I’d likely buy another tranche if it goes below $100.