Here’s the transcript of this week’s chat from TradingWithCody.com, an independent service not affiliated with Marketwatch. See you next week at 2pm EST at http://tradingwithcody.com/chat for more Q&A where you can ask me anything.
Q. Cody, do you think AMZN is a buy at these levels? Thanks Cody, great chat.A. Yes, I think Amazon’s taking a play straight out of the old “create a platform” to build services/products upon playbook that I was talking about earlier with Google and Apple and TV and smartphones. Amazon’s Kindle platform, with the brilliant Jeff Bezos driving the concept of that platform much like Steve Jobs used to drive the concept of the IOS platform, is going to be a major force in content delivery in the future. Remember how I often point how there’s usually one huge clear winner in most Internet-related sectors? Think Google for search, iTunes for music, Amazon for shopping, Facebook for social networking, etc. Using that logic, it’s likely that Amazon creates a huge platform and market for itself around their huge marketplace and amazing underlying server technologies with Kindle. Amazon’s a buy down here and in fact I might be buying some myself in coming days.
Q. Playing a couple of companies that have been beaten down, but starting to come back. How are you feeling about BRCM and TQNT?A. I like Broadcom and its management and its history of success better than I like Triquint’s. Indeed, as I wrote a few weeks ago when the stock was 20% lower than its current quote: “I do like BRCM a lot more in the high $20s than I did in the $30s, and longer-term it’s a great play on the app/cloud/smartphone revolution as you imply. I don’t think you can play this upcoming earnings report after the company just told everybody how that report will come in, but yes, I do think there’s more upside than downside potential both near-term and long-term in BRCM here.” Sure wish I’d bought it then. I still think it’s a longer-term buy.
Q. Any views on CIEN?A. Ciena’s likely to benefit from the demise of the AT&T/T-Mobile merger as AT&T in particular will likely speed up spending on their core infrastructure buying Ciena equipment to compete with Verizon’s nation-best network. I will take a look at Ciena anew in light of that logic.
Q. What about CY Cody, is it time to add?A. I think Cypress might have some inventory in the supply chain that’s being drawn down a bit which could limit the upside from this quarter. That said, if the company sees that inventory down heading into next quarter could mean some upside guidance. Longer-term, I’m starting to see the chip vendors try to integrate some of Cypress sensor motion technologies into their chips would is worrisome and something that I’m staying on top of.
Q. Hi Cody, Cirrus came out and upped their revenue forecast range pre earnings. Is there enough in that information to conclude that Apple’s last quarter is indeed a huge blowout? Apple accounts for 50% of their audio chip business.A. I like your logic in using one company’s blow out quarter to analyze its biggest customers’ quarter. And here’s what my answer would be — specifically CRUS’s update would indicate that Apple’s iPhones are selling great. But that doesn’t say much about the iPad or the Mac sales, which account for a huge part of Apple’s business too. I think it’s safe to say that Apple’s iPhone 4S has been a huge success and that will be reflected in this upcoming earnings report. That doesn’t mean there won’t be other sectors of their business that aren’t as hot though. Apple be a big ol’ company.
Q. FFIV has a history of huge spikes in both directions after ER. Do you think buying a straddle would be good for these earnings? Thanks!A. Buying both some calls and some puts on FFIV into earnings isn’t the worst idea in the world because yes, it certainly has a history of making a big move either up or down the day after it reports. I’m likely to start my FFIV buying with a small tranche of common today and then I’ll take it as it comes in coming days heading into the report. If and when I have a better feel for what the markets priced in with its expectations about that upcoming earnings report, I might add some calls to FFIV too. Not adding any puts would be dangerous, but I’m a bull on the stock and I trust my directional analysis on these stocks to work out on these trades as I do many of them over time.
Q. Curious about your thoughts on OCZ.A. OCZ is in the solid-state memory drive business and is trying to figure out how to drive the future of storage much like FIO is. OCZ is a poor-man’s version of FIO. That said, if OCZ is to grow at the 50% clip the analysts are expecting next year (with EPS going from 14 cents to 56 cents) there won’t be anything poor about OCZ. Another way to think of it is that OCZ is to Riverbed what FIO is to FFIV, you know? The companies create new markets and end up competing in their respective fields as the businesses mature, but there’s lots and lots of growth along the way if things work out in the markets they’re creating.
Q. Cody, why do you think GOOG is going to beat estimates which are the highest ever, 10.50, in company’s history?A. I got an email from Jeff Macke of CNBC’s Fast Money fame back long before he and I ever did TV asking me why I thought Apple could beat estimates back one quarter in 2004 since they were already “the highest in the company’s history”. History serves as a guide, not as a cap. Apple’s revenues and earnings have gone up like 1000% since that “highest in the company’s history” estimates were beaten back that quarter. I don’t remember how the stock traded the day after that earnings report though. Macke never talked to me about Apple after about 2005, by the way.
Q. GOOG reports earnings Thursday next week. How would you trade it into earnings if you own a lot of it? Thanks mucho, Cody.A. The good news is that the 4% hit that GOOG took on Monday reduced the chances of a “sell-the-news” reaction to Google’s earnings report next week. The bad news is that Google could still sell off no matter what it reports next week. I bought some March Google calls on Monday and if it were to get smashed on earnings I’m probably going to add more calls to the sheets. Because I bought those Google calls Monday, Google’s now a big position for me too though, but I’ve tried to position the portfolio that no matter what happens next Thursday to Google that it’s just another pitch of thousands that will come our way in the next days, years and decades as traders.
Q. Cody, what are your thoughts on MRVL and the Google TV announcement?A. I think Google and Apple are both moving to try to dominate the future TV “platforms” in the same way that they dominate the smartphone platform world of today. That’ll be huge business if they succeed. HUGE. Which means that in three years or so that Ballmer will finally decide that Microsoft might need to try to figure out a TV platform strategy of their own. Idiot. We own a small MSFT position despite Ballmer, who, as I’ve been saying for years, needs to go. Marvell would benefit from Google TV success as long the box makers are buying the Marvell components to make it run, but that’s a long way from having any clear impact on Marvell’s business. GOOG = buy. MRVL = hold.
Q. Cody, banks are very strong, move for real or short opportunity?A. Here’s what I think is happening with the banks. The Republican/Democrat Bankster President of the United States appointed a new head to the new Elizabeth Warren bureaucracy that was one of the few hopes that you and I had to enforce laws in this country. The new appointee, Cordray, is a classic bankster-captured political insider crony who will play the Republican/Democrat bank welfare game on their terms. Meaning that the banks are still trying to figure out how to survive and thrive on welfare and legalized fraud. And Obama appointing a Republican/Democrat croney like Cordray is a big indicator that they’re still very good at that game. And that’s got the bankster stocks rallying up right in our faces. I’m hurting on the BK puts and the new PNC short, though still small, is going against me too. I’m holding them all steady for now as this current Cordray-inspired short-covering phase plays out.
Q. I see that Hostess Brands may go Chapter 11. Will you follow the same strategy with this one as before? Thanks again!A. I probably would try to short Hostess on today’s announcement if it were a publicly traded stock. But it’s privately held and that means there’s no stock to buy or shorts who have to cover.
Q. Cody, MA is down more than 10%, ER Feb 2 and is it buying opportunity?A. MA and V are both dependent upon the Republican/Democrat Regime’s policies to maintain their illegal oligopoly and subsequent usurious charges for their services. The entire model is based upon the government forcing consumers and businesses to use these two companies’ networks. And as I often point out, I’ve practically made a career out shorting companies that depend upon the government to make their business models work because that means their business models are not inherently profitable in the marketplace. I don’t think there’s much of a price that would make me want to invest in MA and I wouldn’t trade it to the upside since I think five or ten years from now it’ll be in big trouble.
Q. The past 1 1/2 months the VIX has only really moved up on down days. If we do in fact rally next week, in buying the VIX calls you are anticipating the VIX will move on rallys? I know its a measure of volatility, but the moves seem to be on the downside not upside. What are your thoughts, Cody?A. I was thinking this morning about that very concept regarding the VIX traditionally being considered a classic market hedge in that it does often drop when the market rises and it rises when the markets drop. But that’s not often the case too. Sometimes when the markets spike to the upside and/or break out of a clear mid-term trading range, the VIX will rally along with the broader markets. Volatility doesn’t mean “Downside” and the VIX is a measure of volatility, not just downside. Pundits and analysts often use “volatility” as code for “downside”, but that doesn’t mean their inaccurate definition translates to the real world.
Q. Cody, any idea why VC is down so much today?A. The company filed their 8-K today and the analysts don’t like something in there, but I have not yet read it and I haven’t seen any analyst notes that explain it, but I’ll ask some friends via email after the chat and see what I find out. There’s unlikely anything in that 8-K that would change my thesis on this stock, that of auto sales reverting back to their long-term average this year and maybe even show some global growth next year and VC, as a major auto supplier, would be a good beneficiary of that.
Okay guys, that’s it. Thanks for reading and I’ll see you around the rodeo. This ain’t my first one.
Cody Willard
@codywillard
+Cody Willard
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