Trade Alert: Culling the portfolio (and the chat made me uncomfortable)

Here’s the transcript from this week’s Live Q&A Chat. But first, a few sells for the portfolio as I work to keep it focused on the most Revolutionary and/or best valued opportunities.

I’m selling all of the following positions, taking some profits on them. It’s not that they aren’t good companies or that I’ve turned bearish on them, but I want to be selective. I’m selling ADTN, QRVO and VIAV for now. I might cull another name or two this week too as I look to add a couple new names.

Including the fact that I’m buying a starter position in Boeing BA. More on that later. Here’s the transcript:

Q. Is your Brexit trade a small hedge position or is it an actual position? Thanks.

A. It’s not small but it is a hedge, not something that I consider a “bet” as much as I consider it a hedge.

Q. Cody I read your British shorts post this evening while my son was watching Captain Underpants. I did hear that they may extend the deadline to June…how will that affect your near term puts?

A. Haha. I outlined the risk of them extending the Brexit deadline in the Trade Alert. There’s risk that the UK market stays in rally mode as endlessly Brexit delay plays out.

Q. ‘”…the UK market stays in rally mode as endlessly Brexit delay plays out.” Can also be applied if you sub “US” for “UK” and “China Trade Deal” for “Brexit”‘

A. Good analogy! PS. Please note my British grammar style in the quotations. LOL

Q. Cody, Are the strength of internet communication stocks, like TWLO, TEUM part of later stage internet revolution and will the 5G produce another wave of new internet base companies?

A. Yes, the Big Data Revolution, the Cloud Revolution and other later stage Internet Revolutions are created by TWLO and otheres. 5G will create a platform for all kinds of new apps and services over coming years, so yes I suppose so.

Q. Cody, Will 5G make interconnected cars a reality and if so, and looking forwards, which companies should be the beneficiary of it?

A. Yes. INTC, NVDA, TSLA and UBER are a few of the best plays on interconnected/driverless cars.

Q. What is your view about SMAR (SmartSheet an Cloudbased company).

A. The stock is trading at 18x next year’s sales estimates, but it sure is growing fast at over 50% per year. I’m not sure they’ve got much competitive advantage long-term though and not profitable.

Q. DOMO – Can you please tell me What’s your thoughts on this stock? Thank you for all you do.

A. Trading at 6x 2021 revenue estimates and growing about 20% per year but far from profitable. Sounds like they’re basically in the same business as SMAR at a glance here, which underscores what I mean about how I’m not sure there’s a competitive advantage to “Domo, Inc. operates a cloud-based platform in the United States. Its platform digitally connects chief executive officer to the frontline employee with the people, data, and systems in an organization, giving them access to real-time data and insights, and allowing them to manage business from smartphones.” I mean isn’t that Google Drive? I’d rather be short than long this one, again, at a glance.

Q. GM CW, Your current take on PANW? As I now have PANW one of my biggest positions in the personal portfolio. You have been excited about this one for a while. I upped the ante big time with you when you said you bought a “pretty big tranche” after earnings, which you never say. How high do you think this one can go?

A. It always makes me uncomfortable when someone asks me “How high do you think this one can go?” about a stock in a rally mode. Perhaps we should be asking ourselves, “What are the risks and how far could this one fall if things go wrong?” about PANW right now. I don’t like to put price targets on stocks, but let me just remind you that you don’t want to bet too many chips on one stock, so please make sure you’re not going to be crushed if this stock goes down 10-20% in a broader market sell-off or up to 30% if business fundamentals falter at some point.

Q. I’m all long, concerned that I should pare down but anticipate culling my preferred stocks before a bull run. Im looking forward to your updated alerts to make a move.

A. It’s certainly a better time to think about paring/culling down now and not when the markets are in a downturn. Let’s think about the long-term prospects for our positions, not just the markets next few moves though.

Q. Any thoughts on TEUM? 250% growth in 2019 (probably going to be a good amount higher than that). Granted, a lot of that growth was due to acquisition but still impressive. 800+ mil in contractual backlog as well.

A. Looks a bit fishy to me frankly. Do you have any idea why revenues dropped from $31 million in 2015 to $12 million in 2016?

Q. I do not. New CEO in late 2015 so thinking it is a totally different company now.

A. I’d want to understand how the company’s revenues crashed like that before I’d buy the stock.

Q. FB has been getting hit over last few days. Are you a buyer at these levels?

A. Yes, I nibbled a little bit for the hedge fund yesterday.

Q. What do you think about TLRY after earnings? When shall we include some cannabis player?

A. I’m not comfortable with the valuations in cannabis stocks right now. They’d need to under go a major panic / crash or I might just sit sidelined on them for a year or two.

Q. Can you comment on your remaining avgo puts?

A. Mea culpa, looks like they’re $0s.

Q. Feet to fire. Where are Snap Nvidia Verizon and intel in 3 years?

A. SNAP = $5 to $25. NVDA = $100 – $400. INTC = $40-$150. Big ranges because my feet felt too hot trying to guess anything too precise at this moment. I don’t like that you guys are looking for dreamy price targets on our stocks right now. Better time to trim than to buy when people are dreamy to paraphrase the Omaha Oracle.

Q. Cody – any 5 year target on QCOM considering the 5g benefits it is set to reap ?

A. Nooooo! Not another request for a dreamy long-term target on one of our stocks. I’m starting to get worried about a sentiment-driven pullback in the stock markets frankly.

Q. VIAV and SNAP – Time to buy more?

A. I love our community at Trading With Cody and the interaction with you guys gives me invaluable insights and helps me think through my own analysis. Today’s chat is so overwhelmingly worry-free and outright bullish — and the markets are so on fire lately — my answer to some of these questions are reflexive from the questions themselves to my answers. That is, all these bullish questions make my answer to this question about whether we should be buying some VIAV and SNAP more likely to simply be “No” not right now, today anyway.

Q. Any feeling about memory stocks (MU) and tools for chips stocks (ASML,LRCX)? Is the 2nd half of 2019 turnaround too hyped right now to buy them?

A. Just thinking it’s not time to chase today. I like MU and LRCX but not chasing them.

Q. Cody, Seems Elizabeth Warren and a number of progressives want to break up the FANG stocks. Any cause for concern or just political blather? Thanks.

A. Here’s something I wrote back a year ago that answers this question: ‘Since we’re on the topic of Amazon, let me answer the question I keep being asked about Amazon and anti-trust concerns. What I see happening is with anti-trust concerns and Amazon is this. The Democrats will pretend they are going to go after Amazon for anti-trust, but it won’t really go anywhere because the Republicans and Democrats haven’t actually been actively anti-trust in decades. Just last week, Chuck Schumer came out with a “Better Deal Platform” for the Democrats. To be sure, it drives me crazy when any Republican or Democrat like Chuck Schumer who has been in the system for decades says something like “The Republicans/Democrats have lost their way for years.” Well, the Democrats and Republicans have lost their ways for decades and people like that guy are part of the problem.) But the point being, one of the major bullet points that he focused on there (ie, that the propaganda that his PR people put together for him) is all about anti-trust. Now remember that under Obama the beer companies and any other industry that wanted to and spent enough money lobbying Republicans and Democrats were allowed to roll up their competitors. There is almost a monopoly in beer in this country right now. That happened under Obama administration, under a Democrat administration. Then you read the Democrat’s new “Better Deal” and they are like “we have got to stop these mergers and acquisitions,” and they cite beer companies having been rolled up as an example! You can see why all this just drives me crazy because people are going to vote for these guys that have allowed the beer companies to become a monopoly because they are now propagandizing that they are now against that. The point being you are going to see the Democrats really focusing on anti-trust and Amazon will be at least somewhat in the cross hairs of that. Since everybody recently has started talking about Amazon and anti-trust, the idea of Amazon and anti-trust is getting out there. And the Democrats and Republicans never have an original thought in their life. They just go with whatever looks like is going to poll better. If it looks like that is going to poll well (and I would think that Amazon anti-trust arguments will poll well — the reason the Democrats put that talking point in their new “better deal” thing is because it polls well) the Democrats are going to at least going to propagandize they are going after Amazon and other monopolistic/oligopolistic/dominant companies. Right now the people in power are the Republicans of course and it doesn’t poll well for them to go after anti-trust arguments. So they are glad to allow Amazon to do what it is going to do. Finally, don’t forget that Jeff Bezos owns the Washington Post. So, yeah, I expect there will be a lot of noise around Democrats going after Amazon and companies like it. I don’t think it will get anywhere with Amazon though. And I am going to tell you right now, I hope the stock gets hit for like 20 or 40 percent off worries the government is going to crack down on some sort of anti-trust thing. If there is one thing we know the Republicans and Democrats do not crack down on anti-trust. So they are going to let them do what they want to do. If the worry and fear gets built into the stock price, man I will take that opportunity to make Amazon my by far biggest position. If I could buy even more Amazon, which I’ve owned for years and at a much lower cost basis than today’s quotes — if I get the chance to buy more Amazon at $750 or 800 bucks in the next six months or year, I will do it. And Trading With Cody subscribers will be the first to know when I strike again. I don’t think I will get that opportunity though. Why? Because of Alexa. Sure, there’s Amazon Web Services and there’s Amazon retail juggernaut and Amazon music and Prime and TV and movies and…but those are reasons I’ve owned Amazon for years already. The reason to own Amazon for the next five years is because Alexa is set to takeover the world.’