Chat Transcript for Apr 18, 2012: FFIV Earnings, RVBD, GRPN, JNPR and more

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.

Okay, guys, hello. Let’s rock.

A. FFIV FFIV FFIV. Oh, man, when I get as many questions and opinions about an individual stock as I am getting about FFIV today, the fireworks are usually about to go off — good or bad is the question. In other words, it sure seems like both the bears and the bulls are panicking about FFIV into tonight’s earnings call, which means that one of those groups is probably going to be panicking with their trading fingers tomorrow after the call. A good report and guidance and FFIV will likely fly by 5-10% tomorrow. Bad report or guidance…and the stock will probably be hit by 10% tomorrow. I expect a good report and good guidance, but unless I’m WILDLY CONFIDENT in such a report and guidance into a set up as binary as this one is into tonight’s call, I tend to tread lightly. I own FFIV common right now and I might even buy a tiny bit of calls into the report tonight, but I won’t be betting more than I’m comfortable losing into a 10% selloff tomorrow if such were to happen. Good luck all.

Q. Hey Cody – I wanted to get your thoughts on STX from here, and looking at the upcoming releases for our longs, who do you think is set up for an earnings upside surprise?
A. Nothing changed with our STX long except the stock is up at 52 week highs, so that higher price adds a little bit of investment risk. I’m not changing my STX stance at all. I’ll let you guys know if and when I see good risk/reward on the pre-earnings gambles. It will depend somewhat on the stock and stock market action as earnings season rolls on and the individual opportunities arise.

Q. Hi Cody, I very much support the idea from last week’s chat of a table listing your buy/sell recommendations with strike prices and expiration dates. Can we add stops? I think this will cut down on a lot of confusion and help improve our portfolio performance. To give an example, you posted in the last few months re: buying STX longer dated calls and shorting WDC. Without more specific instructions, I bought Jan $40 STX calls and July $38 WDC puts. I am so far up 20% on STX and down 60% on WDC. I’m thinking that with your price/exp suggestions I could have done a lot better. Any predictions on WDC ER? What I’m reading is making me worry so I’m thinking of selling and taking the 60% loss. Where do you see these stocks heading and what are your stops/expirations dates/strike prices? Thanks.
A. Yes, at the end of each month, we’ll list the trades from the month in a table. But I don’t think the stop-loss idea is a good idea because there are too many variables on different dates/strikes and stocks and I think the stop-loss concept in general is focused on too much by investors. I almost always explain exactly what dates and strike prices I’m using and I explained that I was only shorting the WDC common when I did it, not buying puts. Regardless, I understand your question and your pain and will try to be even more explicit when I make individual trades. I’m down 18% on my WDC common short but I have a double in the current batch of STX calls I hold and I sold another batch of STX calls for even bigger gains a while ago, as you guys know. I don’t expect WDC will report good numbers as the pricing power of the disk drive vendors like STX and WDC is strong right now. But as I’ve explained many times, WDC is part of a paired trade, not an outright short bet, and as I’ve quoted one of my mentors before, “May you lose money on all your hedges.” Because that usually means you’re making money on the actual investments if you’re losing on your hedges, such as I am with STX vs WDC, see?

Q. What are your expections for RVBD earnings tomorrow? Thanks!
A. I’m also confident about RVBD into tomorrow’s earnings report, but I’m also not betting big ether way on that one right now. I’m long RVBD common.

Q. What kind of move could we expect on RVBD tomorrow, good and bad? Could it be 10 plus percent? Looking at some short terms calls for it as well as FFIV, potentially.
A. There’s always potential for a huge move in a high-beta stock like RVBD into an earnings report and tomorrow is no exception. Not seeing the turmoil around RVBD that I’m seeing around FFIV, but who knows til the reports come and go.

Q. Hi Cody, thoughts on TEO?
A. “Argentine leader moves to nationalize oil company”‎ – 1 day ago “In a bold move to gain control of Argentina’s energy reserves, President Cristina Fernandez pushed forward a bill to renationalize the country’s largest oil company on …” How long before we read the same headline about Argentina nationalizing their telecom/communications assets? See my comments on BIDU — I like BIDU but I won’t buy it because I don’t trust China-based companies and I don’t even care for Telecom Argentina’s business like I do do BIDU’s…and I’d rather buy a China-base company than an Argentina-based company any day of the week even as I almost never bought a China-based company. In other words, my thoughts on TEO: Run for the hills!

Q. Hey Cody, did you ever get around to reading Currency Wars? What is your take on the world moving away from the USD as the reserve currency?
A. I didn’t read it yet, sorry. I do think the US Republican/Democrat Corporate/Banking Regime and the system/currency it uses is doomed as we know it. The question, as always, is a matter of when. And perhaps there’s still hope that we revert back to some sort of equal application of the rule of law and that you people finally join me in refusing to vote for any Repub or Democ under any circumstance in any national election, thereby inching us back towards rule of law, an end to corporate looting and senseless wars…bringing about subsequent prosperity, regardless of whether the world realizes that our fiat currency has been rendered worthless in the last ten to twenty years.

Q. What would you do with 2 AAPL Jan13 450 Calls up 590%? Sell, Hold, Dbl Up or Exercise? Been selling all the way up (thanks to you) and have 2 left.
A. Wow, congrats on that kind of gain! That’s awesome. I would sell half of them and buy twice as many calls with higher-priced strikes. Sell on strength such as the recent AAPL actoin and perhaps wait for a down day to buy the second tranche of the higher-priced calls.

Q. Is grpn a buy at any price?
A. All stocks can be a buy for a trade…but as far as investing GRPN, I don’t think so. I don’t trust the management or the business model…I don’t think GRPN will be around in five years. See Excite@home or even the 99% decline in value of AOL for more on that concept.

Q. Hi Cody, what is your take on NVDA? It would seem to be a good buy with all the cash they have per share and low P.E. What gives for the constant low price in that name? At what price does it become a no brainer value play?
A. I’m a believer in NVDA for the long-term and it is cheap as heck, but they haven’t been able to catch any traction despite being in a great spot to supply graphic chips to tablets. Partly it’s been an inventory problem and the company’s suffered as tablet growth has displaced PC demand which has their higher margin chips. Anyway, yeah, I might be a buyer of NVDA before their next earnings report which comes in May.

Q. Yesterday in your posting of the bust it was good to have a 90%-10% long-short split for our portfolio to have downside protection. Is that 10% the shorts you currently have in your portfolio, where we expect them to be profitable even when the rest of the market is up? Or are they more like VIX calls?
A. I should have been more specific in saying a 90-10% long/short split in technology stocks. I’m rarely 90/10% long/short except when the markets have really crashed or something, as I want to have some short exposure to declining welfare businesses like Apollo, LPS or AONE before those. Sorry to have confused you. I want to be mostly long tech, not just mostly long.

Q. Hi Cody, what are your thoughts on JNPR?
A. I like JNPR a lot before next week’s earnings report while it’s below $21 or so, and I might buy some calls before then myself. Let you guys know of course.

Q. Oil is going lower. Do you like nflx?
A. Does a lower oil price somehow help NFLX? If not, then why bring it up? Seriously, I’m not criticizing, but what does the price of oil intraday or intraweek have to do with NFLX and/or most of your stocks? Oil and gas being near all-time historic highs is worrisome to the overall economy, but not sure it’s relevant beyond that, no?

Q. I just think lower oil – especially if it goes much lower-helps consumer and consumer stocks like nflx and amzn?
A. You could also argue that lower oil prices will result in people spending more time traveling and partying and socializing with other people face to face, meaning that they’ll be spending less time in front of their PCs/tablets/TVs watching NFLX and ordering junk from Amazon, no? Lower oil prices certainly are bullish for clothing/style retailers, but not so clear cut a benefit for NFLX/AMZN/Internet/tech stocks.

Q. Cody not sure your a big follower of BIDU but I believe it is a Bell weather of the China internet. The company is growing revenue at 50%-80% YOY and is trading at a forward multiple of 23. Based on their dominance in the Chinese search market could this stock double soon. It’s not unusual to see a company with this kind of dominant position and growth sport a forward PE of over 40, ie. Amazon and Chipotle.
A. I always tell people this about BIDU — it’s MUST-OWN tech stock if you have enough guts to buy and believe the financials of ANY company based in China.

Q. Cody, any musings on SLB, or ESRX? Longs or Options? Thanks in advance.
A. No musing of any advantage or edge. I’ve spent 15 years working 80 hours a week gaining an edge on the stocks I cover…do you or do you know anyone who can help you get that kind of an edge on SLB or ESRX? I used to have an office on the 40th floor in NYC next door to a guy running a health care-centric hedge fund who spent as much time and energy on companies like ESRX as I did/do on AAPL/GOOG/FFIV/LPS/APOL/etc.

Okay guys thanks and I’ll see you Monday at 7pm EST for a special “Night Time Edition” of our TradingWithCody Live Q&A.