Chat Transcript: Strategies, definitions and explanations for all your questions

Here’s the transcript of today’s chat. See you next week at 2pm EST at for more Q&A where you can ask me anything.

Q. Cody: do you recommend leaps on some of your favorites e.g. FIO or do you prefer common?
A. I like calls, call LEAPS (LEAPS are options that expire say, 12 months out or more) or common in FIO, but it will be wildly volatile and risky along the way. LEAPS on this high of a beta stock are expensive, which adds to their risk, but options give you a way of capturing leverage with a little amount of capital as the stock moves. You have to decide on your own what’s reasonable for you. You can check the archives by searching for “FIO” here on to see what I have done with FIO so far and you’ll certainly see more updates and specific trading ideas from me on FIO in coming days, weeks, and months.

Q. Hey Cody FIO – just been upgraded. 43m shares were due for unlock today and do not appear to have been sold – still good to buy now or wait for a pullback?
A. If FIO is to double revenues this and next and earns $3-5 a share in 2015, what’s the difference between establishing your cost basis at $22 or $25 or $28? I don’t want to try to game the share-releases and quarterly reports for this long-term, high-growth, high-risk investment.

Q. Who wouldn’t LOVE to see Cody’s exact allocations — how much he owns of what and his entry prices — rather than just NOTIONAL ??? Cody — is full disclosure POSSIBLE?
A. I like how you phrase the question “Is full disclosure possible”? The answer is no, though lots of services try. The problem is, as I always point out, that I have a lot more money on the sidelines, a lot more income that’s still growing, and other assets like the real estate in NM that I’m loading up on that have no place and/or are impossible to allocate for. That’s why I use the “notional size in order from largest to smallest” and that’s why I detail the trades that I do when do them, including adding to/changing existing to positions. I disclose and describe in detail every trade I do and that’s what the archives/search are for on the site. You can go back and see what I’ve bought when I’ve bought it and at what price, but as the years wear on, the “entry prices” become impossible/irrelevant as I buy and sell options and otherwise hedge/leverage disparate positions. You see it all in real-time.
I like Cody’s service because of not letting us know the percentage that we should allocate for a stock. If he does on a percentage basis, I would recommend Cody to start a mutual fund!!!! (at least it will save everyone the transaction $) In summary, I listen to the theme that Cody pitches and then I do my research and decide to invest or not invest. (similar to investing in startup companies).

Q. Cody…are you playing ENER for the technical bankruptcy trade?
A. I would tell you guys if I were doing the ENER bankruptcy technical trade. The company did go BK yesterday and the stock traded down 80%, now trading at 25 cents, up from a low of 20 cents yesterday. I might go ahead and take a shot at it, and will let you guys know if and when I do. Nothing wrong with the trade, but we’ve just had two huge back to back profits on these bankruptcy technical trades with AMR and EKDKQ, and I don’t want to be greedy.Trading is a LONG process and today’s just another day on the road to long-term successful investing and trading. Sorry I don’t have any quick trading ideas today, but that in and of itself is one of the most important lessons I can teach you guys — sometimes not trading is the right thing to do to profit.

Q. Cody what are your thoughts about NTAP into todays earnings? Any possible earnings trade for it?
A. NTAP will likely make a 10% up or down move tomorrow or more if history is any guide. The stock is down big from its annual highs, but it’s rallied hard with the broader markets of late. Trying to gauge whether the company will meet and raise estimates (I’d guess yes) and whether or not that’s already priced into the stock for tomorrow’s reaction (I’d guess no) and whether or not the stock can and will respond to a positive surprise (I’d guess yes) is a big gamble. I’m not trading it, but there above you have my analysis of the trade/gamble you’re asking about.

Q. Cody what are your thoughts on PCLN? Long term of course.
A. PCLN It’s a stock that I had to remove from my screens a long time ago. I’ve had some huge long-term investment tech winners like Apple and Google and F5, but I kick myself for not having been o the PCLN train from 2002-2007 when I was running money. I also have never had a good feel for trading that stock near-term (probably because I have such an ingrained anger towards it) that I long ago quit trying to trade it. It’s okay to have blacklisted stocks and that is one of the rare blacklisted stocks on my list.

Q. What are your thoughts on LPS earnings report? I wasn’t impressed but the stock has gone up since they reported. Good time to buy or let it settle? Thanks
A. I assume you’re asking if it’s a good time to buy puts and/or short LPS, not buy the stock since you know I think it’s headed much lower over the next couple years. That said, as I’ve been saying since the stock started spiking off its lows, there’s been a marked turn in the regulatory/rule of law rumblings from the AGs and the Administration which, while it appears in every press release they issue that they’re still serious about going after LPS and its MERS technology, the backroom dealings and stock action seem to indicate otherwise. As I’d said last week, I didn’t think LPS’ earnings report would be a catalyst and it wasn’t — the stock action is all about whether this company gets busted for its misdeeds and destroyed for its fundamentally flawed title transferring business, and business for financial misdeeds and flawed titles is apparently booming for now. I think it’s time we let the dust settle and get more details about just how badly the AG/Administration is selling the homeowners and citizens of this country out.

Q. Cody, thoughts on CRM into ER next week 2/23 I believe?
A. Would rather be short than long CRM for the next year or so, but I have no idea what will catalyze the stock in this upcoming earnings report. Sorry.

Q. Thoughts on OCZ?
A. OCZ is creating on its own marketplace, which is very similar to the marketplace that FIO is creating — — putting flash in servers and other places that hard drives have traditionally been found. I like the management and technology at FIO better, but OCZ is probably one to watch/own too for the long-term. I’ve got it on my radar.

Q. Cody, your thoughts on CHKP
A. CHKP is a very well run company and tax filing in this convoluted socialist country of ours with its 100k+ tax codes is a growth business. Someday, maybe voters will figure out that equal protection and application of the rule of law, including tax law, is what drives prosperity and growth, not to mention freedom, in an economy an society. That would mean we’d have to stop voting for EVERY Republican/Democrat in the country as their entire platforms consist of changing/creating/convoluting tax law (and creating other targeted redistributions of wealth and taxpayer-funded “markets” which is an oxymoron, of course) and I’ve little hope of that happening in the next couple/five years so, CHKP is probably another medium-term government-enabled growth business that someday will be a great short.

Q. Cody, want to take a stab at ARAY?
A. I’ve spent the last fifteen years of my life studying technological revolutions as well as financial/political shifts and how to invest/trade off them. I used to run a hedge fund in a high rise office building on Park Avenue on a floor we lovingly called a “hedge fund hotel” (because we worked straight through some nights for one reason) right next door to a bio-tech/health-care hedge fund. As much expertise as I have in tech/finance/politics, I have no expertise in bio-tech/health-care and I can’t remember the last time I was tempted to try to trade/invest against the likes of my buddies at the bio-tech/health-care fund next door. They knew this kind of stuff like I knew my kind of stuff and there’s a lot to be said for sticking with what you know. And this is Greek to me: “Accuray Incorporated designs, develops, and sells medical radiation systems for the treatment of tumors anywhere in the body. The company offers the CyberKnife system, an image-guided robotic radiosurgery system used for the treatment of solid tumors. The system tracks, detects, and corrects for tumor and patient movement in real-time during the procedure, enabling delivery of precise, high dose radiation typically with sub-millimeter accuracy. The company also offers the TomoTherapy system, which consists of an integrated and versatile radiation therapy system used for the treatment of a range of cancer types.”

Q. Curious as to what your take on CSCO is, its had a nice ride, near most analysts estimates and has been floating at these levels for a while – whats your take on what it will do in the next 3-6 months and do you think it will continue to outperform or is it nearing the top of its run for now.
A. Great questions and insights in your question about Cisco here. My main answer about the CSCO trading outlook for the next three months would be that it will likely be a slightly higher-beta version of the broader Nasdaq. “Beta” is a measure of how volatile a stock is vs. the broader markets, so I’m saying that if the Nasdaq rallies 5% in the next three months, CSCO would likely be up maybe double that, but if the Nasdaq were to fall over the next three months, CSCO would be down maybe double that also. Mid- and longer-term, I expect Cisco to march to $30 and maybe higher, but that is a process that will take time and will need to be monitored every step of the way.

Q. Cody – any thoughts on ZNGA after their bizarre earnings release?
A. Same analysis for ZNGA (and LNKD) here as it has been — I’d rather be long them than short them for now, but soon after Facebook comes public, I’d probably rather be short them than long them.

Q. What is your opinion on chk?
A. I am not a fan of any company in the wildly convolutedly subsidized energy sector, because without some transparency into just how much those companies need those subsidies/protections vs. how much they would earn in a more “normal” market, is too hard for me to tell. If you’re an energy bull, I’d rather own non-leveraged energy ETFs than any specific stock in the sector.

Q. Cody – I would like your input on JIVE after recent positive endorsement by Barrons. Do you see this company as a potential takeover by big guys like ORCL or FACE (when it starts trading).
A. JIVE’s management comes across way too promotional for my liking. There’s just a sixth sense that something’s not right there and I stay away from it for that reason alone. Look at the first sentence at how the company describes itself for crying outloud…could they hit on any other “trend” terms: “Jive Software, Inc. provides a social business software platform for businesses, government agencies, and other enterprises.”
Q. Cody – Thanks for your insights and sixth sense. I need to do somemore HW on this then!
A. To be clear, JIVE’s probably a lot like ZNGA and LNKD in that it’s probably going higher into Facebook’s IPO, but that this one in particular will probably be a GREAT SHORT OPPORTUNITY IN A FEW WEEKS OR MONTHS.

Q. Hi Cody, you wrote some time back is NUANCE the next apple? Do you still feel this way?
A. I still like Nuance long-term a lot, but it’s sure tough to truly find “another Apple” that will go up 7100% since I bought it and told readers about it like I did with Apple. Could be though and we’re already up huge on this pick and I do plan to own it for a while still.

Okay folks, that’s a wrap. Exit stage left. Thanks for subscribing and see you next week here in the chat. See you on the site and in posts/trades/email updates in the meantime too of course.