Cody Kiss & Tell: Facebook lockup, FIO upside, the Mainstream media and more…

Here’s the transcript to this week’s Live Q&A chat. Join me next Wednesday at 2pm EST at http://tradingwithcody.com/chat or send me an email with your question at support@tradingwithcody.com.

Let’s rock n roll. Ask me anything.

Q. Hi Cody, I would like to ask your advice in how to start investing. I mean, I don’t have too much money, but I’m saving. What I actually do is buy and hold, because slippage can eat my savings. And then I read you saying “Buy this, trim your gains, use options” and it drives me nuts because I can’t do that.
A. Okay, let’s talk this through some. First off, as I’ve said before, but I probably need to make clear more often, is that you can just use common stock instead of options whenever you see me do an option buy. That is, if I send out a note that I’m adding to my AAPL long position by buying call options, then you can simply emulate that strategy by buying some AAPL common. And there’s nothing wrong if you’re a starting-out investor and growing your income and have upside for the future, with just owning even a few shares of AAPL common. Say you have $3000 or five shares of Apple as your largest position, well, sometimes you can sell one share when you see me trim and sometimes you can buy that one or two shares back when you see me get aggressive buying Apple calls. Finally, it can be frustrating to see other people with more capital be able to invest/trade/move it more effectively than you can…and I used to feel the same way when my hedge fund was just getting started and was tiny and I would lose some profits through slippage and over-trading on little capital and what not. Know your own portfolio, your own income levels, your own future earnings power, and your own tolerance for risk and that will always be the best determinate of your strategies.

Q. How do you keep your head straight amid all the talk about macro, the fiscal cliff, China slowdown, the elections. etc.? I find that there’s so much noise it paralyzes you when one person says up and another says down… Do you listen to this at all or just focus on the fundamentals and technicals?
A. See, every macro-economic/global headline that you read about in the mainstream newspaper and/or on the TV is almost wholly coming from someone who wants you to not focus on what’s important because they have some vested interest in lying to you about what matters. The EU-debt crisis doesn’t exist except when it’s in the headlines, you know? Meanwhile, Japan and China and Taiwan are really getting serious about war. But you won’t see that in the headlines unless/until it’s already factored into the markets. Let’s talk about Akin’s idiotic rape comments and not focus on the fact that both parties have added $7 trillion to our national deficit with bank bailouts/bank handouts/ and other forms of covert corporate welfare over the last five years alone.
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This is a great question, I’m going to expound more here.
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When I was at Fox, every single day for the first couple years, I fought with my producers about what topics to cover and what angle to cover them on. We had Austin Goolsbee when he was the head of Obama’s economic team on my show and instead of talking about the lack of prosecuting financial and banking crimes and how seeing justice would instill confidence in our economy…we asked him why the Obama economic plan was so “socialist”. That’s what one of my partners read in the teleprompter. By the time my producers had destroyed any semblance of providing meaningful economic/financial/or personal reality to my viewers after 400 something shows of nonsense topics framed in whatever way my producers thought Rupert Murdorch and Roger Ailes’ corporate bosses would want, I all but gave up and asked them to cancel my show and buy me out of my contract. Seriously, the first step to getting some semblance of reality about the world and its economy, you have to NEVER watch TV news or read the mainstream papers.

Q. If you do not think the mainstream news is reliable what do you read and how do you get your information?
A. Read everything you can get your hands on. Read good blogs and other independent sources of information like TradingWithCody.com. Corporate news is always biased and not of help to anybody in the markets.

Q. Just as a general comment I have to say I am really impressed with the quality of your research, Cody. It is very clear and concise, as well as easy to understand. I also like the focus of the portfolio on revolutionary trends that haven’t fully developed yet. Surely that is where the biggest gains are to be made in investing. Overall, I think your subscribers should be very pleased with the value they are getting from your efforts here. I know I am.
A. Thanks so much for the kind words. I try very hard to deliver a value-add product for every level of investor and getting feedback like that sure helps me figure out whether I’m on the right path.
Your efforts to help every level of investor are unique and extraordinary.
Yes, I think your research is great also Cody.

Q. I think it’s slightly disrespectful to host this chat on the hour that the Fed Open Market Committee releases it meeting minutes, but I love the gesture.
A. I hadn’t meant to be disrespectful to the Fed by holding our weekly chat at its regular time but anytime I get the chance to be disrespectful to that evil entity or any of the bigwigs in that entity, I’m happy to do so.

Q. Hey cody, do you ever trim smaller positions or mainly just the ones at the top that are the biggest?
A. Yes, I trim positions from the bottom too. Trimming and trading in general are always more of an art than a science.

Q. DDD has been on a tear since I bought around 27 but not a huge position. do you just ride those out for the long term or do you ever trim those and get back in later?
A. Read this for the answer to your question about DDD: http://tradingwithcody.com/2012/08/17/how-to-build-up-a-winning-position/.

Q. I’ve recently read several articles regarding the impact of lockup expirations on recent IPOs including FB. “Other much-ballyhooed IPOs with imminent lockup expirations include consumer-reviews site Yelp, YELP -5.53% software company Splunk and private-equity firm Carlyle Group CG -0.68%. Do you see any investment ideas here? What about the next lockup expiration for FB in October? Would you look to trade around FB if it rallies in coming weeks before the next lockup?
A. See, I already calculate all the outstanding shares and as much of the options for FB as I can and so does the rest of the Street when we calculate its forward earnings multiple and whether its insiders, early investors, employees or eventually the general public who owns those shares, well it won’t affect FB’s stock price and its valuation over the next two to five years, which is what my time frame for this investment is. Those shares coming public in the lockup expirations might or might not overwhelm the buying demand for shares from the general public in the very near-term, but trying to game that is just a guessing game of gambling approach to investing. The more you read about the coming FB expiration and the more you see current FB shareholders panic about it, the more likely that weakness is already more than priced in. Facebook’s stock price this time next year will be wholly dependent on how well it executes and grows its topline and bottomline and will have nothing to do with lock up floats and what not.

Q. How can you recommend Facebook right now with the huge lockup coming off in November?
A. Please see my FB answer above and if that doesn’t answer your question let me know.

Q. Hi Cody, at what point, say for calls out to Jan 2013, will options have enough mojo to be in the money on a rally of FB foreseeably going to 28?
A. Man, the Jan 2013 FB calls, especially those up near $30 are going to be tough to pay off. FB’s next quarter would have to be sizzling to get the marke to juice this thing back up above $30 by year end. Could happen though.

Q. Does FIO have any more upside from here in the near-term or should I wait for a pullback?
A. I have a hard time knowing how to answer some of your questions like this one about FIO. You know I’m taking my foot of the pedal a little bit overall in the portfolio but you know I am keeping FIO as one of my biggest positions. I spent so much time writing about FIO’s upside back when it was near $20 a share and now that it’s up 40%, I just don’t know how to guess where it moves next in the near-term.

Q. You have stated that you trimed your FIO position on this latest uptick. When are you planning on being a buyer again to get on the possible 10X growth?
A. I’m not planning to buy more FIO anytime soon. It’s already a big position and I have long-dated calls in it that give me even more upside if this thing can keep going higher from here.

Q. Cody, is there any possibility of FIO doing a secondary?
A. Yes, it’s possible. This is a company that’s got huge demand ahead of it and they might need more capital in the near-term to meet that demand, but I doubt it.

Q. Interested in LNN today? Also JJC insinuated today that DELL may want to buy FIO after partnership with EMC ended and EMC chose LEnovo and it reported good numbers vs. DELL’s poor guidance.
A. Yes, I like LNN below $70, but I built up my position lower and I’m not looking to add to it yet. Sure, Dell or HPQ or IBM or even EMC or even Oracle or about ten other companies might end up buying FIO, but that’s not why I own it.

Q. Hi Cody, what do you think about the Vringo lawsuit against Google, due for court date of Oct 18? Do you think Google will settle, and is Vringo a good buy?
A. Vringo has $1 million, down from $5 million two years ago, to keep the lights on. They’ve got $2mm in debt. You’re asking me about a company that’s total market cap is $21 million. Last year, Google made $28 million per day. Per day. I have no idea what lawsuit that mosquito of a company is pursuing against Google, but I do not think betting on lawsuit outcomes as the reason for owning a stock is a good idea. If Vringo’s growing and profitable without the lawsuit victory, then maybe it’s a buy. If not, which I do not think it is after looking it over right now for you, then I’d run for the hills.
Thanks Cody.

Q. I own FB 21 puts for Sept. and Oct. Do you think I should sell these now or wait? Do you have any opinion on Vringo and the value of companies that own patents in general? Thanks.
A. You’re also asking about Vringo? Second question in today’s chat about a $21 million market cap company? Man, if you can borrow some VRINGO shares to sell short and have a time frame of six months, I bet you’ll see that stock back under $1. Something’s not kosher about the hype of a tiny cap tech company when 1/5 questions on today’s chat are about it.

Q. Should we give any consideration to the pending ruling on the lawsuit in terms of our AAPL holdings? The suit doesn’t affect my long-term view of AAPL … but do you think either up or down ruling for/against AAPL will materially affect stock price in short term? Buy puts to hedge in case of downside? If we have long-term stock hold and shorter-term call option holds, maybe lighten up on the calls?
A: I don’t think you can game the Samsung/AAPL court case any more than you can the Vringo one. I’ll buy more if Apple loses.

Q. Cody – nice call on trimming up AAPL a couple of days ago. Given the yesterday’s test, today’s rise, the upcoming launch, and the Fed minutes signaling additional easing soon, are you still expecting 700 before the new iPhone? Thanks!
A. Yeah, I still expect $700 for AAPL before the New iPhone hits, but as you know I’m trimming my AAPL down because I was a buyer much lower and it’s still my biggest position.
Thanks Cody – Any thoughts on your expectations for BRCM, INVN and QCOM as we head into the iPhone launch as well?
I don’t think anybody’s making any real money these days trying to game the iPhone suppliers into an iPhone announcement. I’d rather just trade the AAPL than the derivatives of the iPhone these days.

Q. Cody, any thoughts on owning a piece of Samsung through the Korean etf EWY, since they are on the same playing field as APPL and GOOG with their handsets?
A. I’d rather own Google or Apple or Baidu or Amazon than Samsung, because I want to own the platform-owners, not the hardware vendors of said platforms.

Q. Cody , I asked about Vringo because there are a lot of articles in Seeking alpha about it. James Altucher likes it and Mark Cuban bought as huge number of shares. They are suing Google for patent infringement and had a positive ruling on something related to a different lawsuit this week, I believe.
A. Altucher is a Jedi Master, but I don’t like this pick. Cuban’s a maverick (pun intended) who will rip his own shareholders’ or players’ faces off despite his face.

Q. Is EMC a good buy right now?
A. Yeah, I like EMC as another potential stock headed for a tech bubble and its a great company. I don’t own it though.

Q. Cody what are your thoughts on MRVL at these levels? Do you think it’s a decent bet to buy some 2013, $13 calls here?
A: I like MRVL here near $10 and yeah, if you can handle the risk of losing all your money by buying out of the money call options, then a $13 price target sometime 9 or so months out of MRVL probably looks good to me.

Q. Hello Cody, please your thoughts on RIMM. Time to go long?
A: How will RIMM ever make an assault on the iPhone/Android duopoly? RIMM lost its platform dominance. It’s over.

Okay guys, thanks for tuning in.