Trade Alert: Short move PLUS Internet of Things and GoPro vs AMBA

1. First a quick Trade Alert – Pandora is up 6% on rumors that it won some sort of another ruling in its endless quest to pay as little as possible in royalties. One of the main reasons I’ve been short Pandora is because it’s in all this litigation over how much and how often and how it pays royalties even as its competitors like Apple Music, Amazon Music, Google Music, YouTube, Spotify, etc snap on its heals. My only short position and one that is smaller than any of my long positions anyway, I’m adding to my Pandora short common stock position now, with the stock nearing $21/share, doing about a 1/3 tranche position.

2. With a 13 week old daughter who has a tracheotomy tube and a gastrointestinal tube who needs eyes on her basically 24 hours a day, we’re getting little sleep and watching this little girl continually improve and heal. And this weekend, my wife and I were trying to remember if we had any orange juice in our refrigerator at our home, twenty-five minutes away from where we were (we’re staying with our two daughters at my in-laws’ house while adding on a new section for our children at our home. Thanks again for all the well-wishes, prayers and support).

I made the point that in another five or ten years, we’ll likely have refrigerators that will have cameras inside of them and that those fridges will be connected to the Internet over Wifi and we’ll have apps on our smartphones, tablets and smartwatches that will enable us to see inside our refrigerators and freezers at any time from anywhere. That’s the Internet-of-Things that we hear about and it’s coming and you’ll want to invest in it.

Today, Atmel, $ATML, one of the few competitors to our own EZ Chip EZCH is up 40% on news its going to be acquired by a larger German chip firms.

As I’ve said before, we’ll want to try to find and invest in companies that make chips or software or otherwise benefit from the fact that most refrigerators to thermostats to ovens and alarm clocks in your bedroom will need to communicate to the Internet to make them “connected”. There will be billions of IoT appliances and household sold in the next ten years — up from a few million today, and every single one of those devices will need a networking chip inside it.

I’ve been buying some EZCH over the last few weeks as a way to get in front of the IoT Revolution. Texas Instruments and quite a few others are going to be selling chips into this industry and it really is very early in this game, so there will be lots more ways to invest in it in coming years.

So anyway wife sent me and my older daughter home with a sippy cup full of OJ for my daughter to drink this morning. Lyncoln drank the OJ yesterday afternoon on the drive home. But it turned out, we had a huge unopened bottle of orange juice sitting in the top shelf of the refrigerator at home anyway. A smart fridge would have come in handy otherwise.

3. Barron’s published an article this weekend all about with a $GPRO and it was outright bearish, saying the stock could drop to $25 per share — Barron’s bearish arguments would be of no surprise to you TradingWithCody subscribers as the old rag rehashed the very same arguments that I used to make about $GPRO’s stock when it was at much higher levels after it first came public.

I recently flipped from long-time bear to newfound bull on GoPro as the stock is down some 70% and set to have a strong Christmas season. It’s now my second smallest long position in the portfolio, leaving me lots of room to add to it later should I choose to. On the other hand, I’ve long said that Ambarella was a much better way to invest in GoPro’s revenue growth and I still remain of that mindset. For one thing, I’m still not entirely comfortable with GoPro’s management.

As I wrote in the most recent Latest Positions round up —

• GoPro (8) – Recently added this name, flipping from long-time bear on the stock to now owning a small position. At 17x next year’s earnings estimates on 30% topline growth potential, I think this stock could get back above $50 or higher in the next year.

I wouldn’t rush into either $GPRO or $AMBA at this moment, though I do think a small tranche of $AMBA first then $GPRO to get started if you don’t either isn’t a bad idea, as both remain very high beta, highly volatile, stocks and can always get “cheaper” no matter how much they might probably earn in the next year or two.

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