Here are a selection of questions and answers from this week’s chat from TradingWithCody.com, a service not affiliated with MarketWatch.
All right, let’s rock. You bring the roll.
Q. Hi Cody, what’s your updated thought on NUAN ? Not for earnings but looking strategically…..are they somehow involved in SIRI/ EVY, etc.? Or, is NUAN knowhow getting less unique than before?
A.Yes, it does appear that Nuance is partly powering SIRI, but I do remain concerned that Apple’s got other voice recognition resources that they continue to research and develop. That said, a subscriber forwarded me an email he got from e*Trade just this week: “New E*TRADE Mobile with Voice Recognition”. Our back and forth was: Him: “Voice activated etrade? This strikes me as ripe for a financial disaster!” Me: Voice recognition/activation is going to be a much bigger part of every facet of our social/financial/technology lives in five and ten years — we’ll get used to trading by voice activation too. Nuance is powering it for e*Trade too by the way – http://www.nuancemobilelife.com/etrade-mobile-app-for-iphone-harnesses-the-power-of-dragon-3/. I don’t think anybody can touch Nuance’s turnkey solutions right now though there are plenty of upstarts and older tech companies including Microsoft desperately trying to catch and bypass Nuance. I’m keeping a core common position for now. (**UPDATE: I added to my Nuance common stock when it opened this morning.)
Q. I’m curious about FIO. I bought an opening position on yesterday’s decline. I feel the company has excellent prospects for the future but I worry about other competitors in an ever changing technology. FIO seems to have the current edge and have been received strong press from the DEMO conference. Any thoughts? Are you a buyer here or at all?
A. As I’d noted in the Trade Alert post I’d sent out earlier this week, I nibbled some more FIO common recently. I’ve been dead right about this stock being a wildly volatile stock, but the mid $20s bottom I thought it’d stick near has been fallen by already. I’ve explained before that we need to consider ourselves as venture capitalist investors in this one because it’s such a new company that’s not yet trying to focus on profits but rather trying to establish itself as the leader in a multi-billion dollar industry that hardly exists at this point. As the price per bit for Flash continues to fall past that of the price per bit for hard drives over the next couple years, the business opportunity for FIO to displace the HPs and Dells in the server world is huge. But the company has to execute a highly competitive and cut-throat industry and we are very, very early investors in it, so it will continue to be wildly volatile as it also can’t be valued at on any kind of P/E or normal public-company valuation metric.
Q. Hi Cody, can you give any thoughts on ALU please? Near 52 week lows but is it as great a buying opportunity as I hope it is?
A. Oh, the Lucent. Do you remember when Lucent was first spun out of AT&T and it was so powerful that there were conspiracy theorists who thought that Lucent was something derived from “Lucifer”? Or when Lucent was vendor-financing tens of billions of dollars of theirs and other equipment for their customers back in 2000 at the top of the telecom bubble? Or when Lucent invested hundreds of millions of dollars in real-hard cash in a free space optics company (what was that company called…Tel-Air, I think?) and then eighteen months later with their stock down 90% Lucent had to issue a death-spiral convertible that is still haunting their shareholders today? Lucent survived because it had a government-forced monopoly for decades that gave it legacy products to service and a giant customer base to sell to, but they are a classic stock that became a great short opportunity as the government-enforced advantages they’d enjoyed for so long went away as the Internet displaced traditional telecom and competition with wireless and VoIP hit hard. They are to telecom what Apollo will likely be to education in five years from now. And no, I have no idea in buying a lottery ticket-priced share of stock in ALU at under $2 a share today in the hopes that they somehow fix their finances and their company. I’d rather own ZNGA with my lottery ticket-priced money.
Q. What’s your advise on PCLN as you know they report after market today?
A. I’ve told readers before that PCLN is blacklisted on my own trading screens. I’ve never gotten that stock right when I’ve traded it and I basically hate myself when I see a stock quote for that thing and I know that I haven’t been a part of its success. Ugh. Good luck, but I can’t help you on Priceline. Side note — the only person I’ve ever been to intimidated/didn’t-want-to-pop-the-bubble to meet in my life was William Shatner when he came by the Fox Business studios in the green room while I was getting make up. I hid. I literally couldn’t bring myself to meet Captain Kirk in real life because in my mind, that guy in the Priceline commercials and who does hilarious rock n roll covers and stars on a CBS sit com isn’t really Captain Kirk. I love me some Star Trek to this day and I make no apologies for that. Live long and prosper.
Q. Cody – do you have any gauge of what a bottom level on AAPL might be on this pullback? I’ve been gradually adding as it’s been dropping. Also, it looks like short term call options have picked up on STX. Any thoughts?
A. I had this discussion with an old friend who was one of the earlier employees at Google on Gchat yesterday: “David: man is it time to buy some aapl? me thinks yes. there’s a sale going on. even dougie kass is bullish. Me: uh oh i think u and i have discussed what a great contrarian indicator kass’s bullishness can be. I’d rather he be puking too. how long ago did he get bullish? 5% ago? That might be enough! Too easy to just load up on aapl here David: what does that last statement mean? 12:22 PM me: i woudn’t do more than add maybe 1/3 to my existing position now. David: got it. i may do nothing 12:23 PM I like what I got”. All that said, Trying to guess where and when a bottom for any individual stock that’s being traded by millions of people around the world every day is a fool’s game to the poor house. I’ll add to AAPL gently if and when it falls and I’ll likely trim some if and when it spikes. Same playbook I’ve been using for AAPL for nine years now.
Q. Is ZNGA a good play at this price? Will Facebook add any value to ZNGA stock?
A. I like ZNGA here for a trade, not sure I’m convinced about the long-term prospects for ZNGA although I’m warming up to them more as I research the company further. I like the platform that ZNGA is building for games and I like the fact that some of the major video game console software companies are moving to the ZNGA platform. Read this for more on the importance of “Platform”:http://blogs.marketwatch.com/cody/2012/05/08/wake-up-call-for-apple-investors/.
Q. Your opinion on LVLT please.
A Nothing’s changed with our LVLT investment either. It’s a long-term play on the idea that the company’s finally going to grow sales and margins as they’ve consolidated the Internet backbone industry.
Okay guys, that’s it. 90 minutes of Live Q&A about these deep topics leaves my brain cramped. Ever seen this video, by the way:http://youtu.be/MTn1v5TGK_w Sian Welch & Wendy Ingraham – The Crawl – 1997 Go out there and get past the finish line, folks.
Sign up and join us you next week at 2pm EST at http://tradingwithcody.com/chat for more Q&A where you can ask me anything.
Cody Willard writes Revolution Investing for MarketWatch and posts the trades from his personal account at TradingWithCody.com. At time of publication, Cody was net long Apple, Fusion-IO, Level 3, Zinga, and Nuance.
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