Trade Alert: DELL and EWU, Market volatility, and Tesla’s cash raising brilliance

Here’s the transcript from this week’s Live Q&A Chat including discussion on the volatility of the market, Tesla’s cash raises practices and overall portfolio earnings.

Q. Shall we nibble something when Mr. Trump scares everybody?

A. Pitch by pitch. Scare by scare. Trade by trade. Easy does it.

Q. Cody at what point, if at all, you would choose to add to any of your portfolio during this volatility?

A. I might do some nibbling around the edges here but patience mostly for now.

Q. Cody is EWU still the best index to hedge?

A. I don’t think it was ever “the best” index to hedge but regardless, the answer is no. I’m covering part of my EWU and EWUS shorts. Consider this a Trade Alert.

Q. Today seems like one of those days that you buy at the open! Cody should be sending out a game plan, on a morning like this where there is money to be made! These days happen once every few years? Instead crickets! We haven’t gotten a latest position update in 2 months!

A. Mike, great call on buying the open. On the other hand, I have to ask, are you ever happy? You don’t think you get enough value for your money at Trading With Cody? If you do, then, please stop complaining. Sorry, but honestly. Thank you in advance.

Sub 1: Cody – I have to say, because of you and a close friend that is a money manager (but mostly you) I have done quite well so far this year and last year because I have not panicked, as I have done in the past. I believe we all were probably down or flat in 2016-2017. The winter of 2018 was quite brutal. If you bought on the huge down turn at that time and did not panic and held on, you probably did quite well. So, Cody, thank you.

Sub 2: I guess it all depends on which recommended stocks we pick and how much we put in each of them. Speaking for myself, and also for (longer time frame) over many many years from TheStreet.COM to Revolution Investing to TWC, Cody has been the best by far of all the newsletters and other websites (that I subscribed to) for returns and for not getting me into big losers. If I had only subscribed to Cody, I know I would be in a lot better financial condition than I am today. Maybe the expectation is different. I don’t believe TWC is meant as a day trading service. The pace of service from TWC suited me. I think when Cody feels he knows of an edge in the market, he would alert us. And the best part IMHO is he always let us know when he thinks he makes a mistake a la, EA or the market situation changed. The personal communication with this chat room and the emails is a lot more than I got from other services.

Sub 3: Been a long time subscriber. In the past two years I’m up 40% on a fairly large portfolio. TWC is primarily about identifying the best investments, not necessarily interpreting the news and nailing timing on entries/exits. That’s up to you!

Sub 4: Love the response. With all due respect to my TWC buds here, avoiding knee jerk, panicky responses to daily undulations in the market caused by news that is not really newsworthy, IS THE VERY REASON why we get value from this site. Net result of today’s wild panicky market? My portfolio is down less than 1%. You nailed it. Furthermore, forget the gains in the last two years (not really), my fair sized portfolio is up 36% in the last THREE MONTHS thanks to Cody. That’s 100% Cody, and while a little bit of luck also came into play due to the timing of the AAPL/QCOM settlement and our 2019 options, I promise you two things: (1) I would not have owned those options without Cody; and (2) I will never stop telling people about it. And Cody, one last thing, your Tesla does not even come close to being your best purchase in the last three years. The one that gives you the most visceral pleasure, perhaps. But your best purchase in the last three years was clearly your QCOM calls, which doubtless earned you enough to buy a few Teslas. I know it aided me to open full positions in QCOM and TSLA and have plenty left over. Wait, Cody: Okay, the car might be the coolest thing you have ever purchased after all. https://electrek.co/2019/05/06/tesla-model-3-autonomously-pickup-owner-iparking-video/

A. Thanks for the kind words and congrats on the returns, everybody. Trim some! And yea I’m telling you, the Tesla is insanely cool! Meanwhile, VW is making a Bugatti out of toilet bowl material. https://www.businessinsider.com/24-million-bugatti-veyron-made-porcelain-rare-car-2018-5

Q. I like the idea of TSLA as a EV play, particularly thanks to their focus on AI and self-driving features. A major concern is what seems to be a very high churn rate on executives. Either they don’t think the company has a bright future or working for/with Elon is more taxing than they can handle. Neither is good, but neither means TSLA can’t still pull things off.

A. A lot of the core team of execs and co-founders, including the CTO, are still around. I don’t think the executive turnover at Tesla is any worse or better than at most companies its size and stature. The short sellers and Tesla haters want us to focus on anything negative they can drum up. This is a classic example.

Q. Hi Cody, I hope your doing well. I wonder why people say that selling extra stocks for more cash could be bad for Tesla. As an example if I own a company for 100% which is 1 stock and its value is $100 and I make one more stock and sell it for $100, I own 50% and got $50 cash. So nothing really changed, right? Or do I need to see this differently?

A. I’m not sure what you were saying there at the end, but let me answer the question as to whether or not it was bad for Tesla to sell stock for cash. First of all, they raise cash brilliantly and cheaply. In that they sold about 1% of the company at $243 to raise a few hundred million dollars. They raised another $2 billion by borrowing money at less than 2% interest rate and if the stock rallies to like $350 a share, then the lenders also get some Tesla shares — meaning essentially that Tesla’s sold $2 billion worth of stock at like $350 when the stock was at like $240. Now they can run their business and grow and invest and move on from having to worry about their cash balance for the next year or two or forever now.

Q. Cody, I bought some TSLA on your recommendation and though I am down, I am fine with it. You opened my eyes to the power of it. Still 2 primary concerns 1) the difference between this and FB is Zuckerberg proved to be someone who really wanted to please the street. I remember FB being down for 4-6 months as the market seemed to want it to prove that it could monetize mobile. He focused on that, delivered it and they were off to the races. Musk, has built up a huge amount of distrust continued over a number of years now. 2) margins, I agree this is more a tech company than a car company, but for now, it’s a manufacturer and those guys can never get the margins associated with software type companies like GOOG/FB to name a few. Maybe this is more like APPL but its so expensive to buy one…anyway just curious to hear your thoughts.

A. Musk’s not perfect in how he handles the street, but really who cares? The Street just helped him raise another $2.7 billion this week. As for margins, don’t forget about driverless technology and robotaxis and solar energy and so on down the road (pun intended).

Q. QRVO vs SWKS. Who you buy?

A. The short answer is QCOM.

Q. Cody, Will 5G base stations be a growth driver for QCOM?

A. From Kevin Lincoln, my research partner: It is not a driver. QCOM makes a majority of its revenues from licensing baseband technology for smartphones and selling baseband chips in smartphones. Baseband chips allow the smartphone to connect to the wireless network. In 2018, around 1.56 billion smartphones were sold worldwide.

Q. Cody, I know we have a lot of 5G plays already but have you considered $adi? They look well positioned to be a major beneficiary of the build out wave. Around 25% of business is RF communications and they look to be a solid company across the board.

A. Kevin and I will take a look.

Q. Hi Cody, what do you think about VZ after earnings and our VZ option calls?

A. Verizon’s quarterly report was fine. Not much to do with the position for now.

Q. Don’t we have July VZ calls that have lost value? Should we think about rolling them out?

A. Yes and probably not. I probably will just ride ’em.

Q. With June DELL calls coming to expiration in a few weeks, do you intend to roll them into shares? Is this a good move if you have a full position already?

A. I have sold down almost all of my DELL call options at this point and I’d suggest probably doing the same if you also have a full-sized common stock position in DELL. Consider this another Trade Alert about me selling DELL call options and taking the huge profits we have on them.

Q. Hey Cody, which is the better setup into earnings PANW or DELL?

A. No idea.

Q. Cody, do you have any other medical/biotech/healthcare company like AXGN on your radar that could be multibagger, higher risk surely assumed?

A. Trust me, I’m working on it all the time! It’s not my specialty though. I wanted to invest in CRISPR technology companies but am still not comfortable with the space, for example.

Q. I made good money investing in biotech for years. The last 3 years were impossible to predict on any particular BT or other healthcare stock. Thanks for AXGN. Any of the major BT pharma companies actually undervalued that you know of?

A. No, not that I’m aware of. I’m short a small position in the biotech IBB ETF as a hedge to the broader portfolio.

Q. Hi Cody, What are your expectations for JD earnings to be reported end of this week?

A. My expectations are that the stock will be volatile after the report. Feet-to-fire, I’d expect a better-than-expected earnings report. Expecting some expectations to expect other people’s expectations except when the word expect starts sounding funny as you type expectations and expect more times than you expected.

Q. Hi Cody, what do you think about SEDG earnings beat and forecast?

A. First glance it all looks fantastic. I will dig in later today. Wish I owned more since it’s up more than 10% right now as I type.

Q. Cody. How would you rate MO now that Congress wanted to raise the legal age of smoking and vaping from 18 to 21?

A. I’d rate it the same as I did before. I don’t own MO because of sales of JUUL to 18-20 year olds. In fact, I’d support the move by Congress as a citizen and as a shareholder.

Q. Cody, have you started looking at any beaten up cannabis plays that could potentially be survivors for future? Cannabis legalization in full force all over the world….thnx

A. Yes, but am not comfortable with the valuations. Not even close. Cannabis still mostly feels like a bubble that’s in the process of popping.

Q. Hey Cody, I have no positions in splk, spot, keys, comm, cpb. Is it a good time to buy any of these? UA a hold or buy?

A. I’ll do a latest positions update. I usually tell people that if you want to own one of a stock, start small with a 1/3 or 1/5 size position.

Q. Hi cody, SNAP…you wrote “Snap reported some good numbers, it looks like they’re monetizing nicely and one more quarterly report like that and the stock might indeed go to $15.”…So do you thing their last report met these requirements, was that good numbers enough to think about $15?

A. And this is why I hate to even hint at price targets. $15 for Snap? I mean, it’s just a random number I could see the stock getting to. Longer-term, the thesis is in tact and I’d suggest trimming SNAP rather than loading up on it near $12 here, so there’s that too.

Disclosure: At the time of publication, the firm in which Mr. Willard is a partner and/or Mr. Willard had positions in some of the stocks mentioned above although positions can change at any time and without notice.