Transcript to this week’s chat: Ratings for MS, RVBD, WFC, AAPL, BIDU, and a dozen others..

Here’s the transcript to this week’s “Stocks-Only” chat on  See you next week back at where I’ll answer anything you ask me.

Q: Hi Cody! Thanks for the profitable service! Does MS stand out in the graveyard that is the financial space? I noticed some significant insider buying around the $22 level…or is this just painting the tape? A: MS – Morgan Stanley would be bankrupt tomorrow if not for the outrageous ongoing welfare programs for the banks that have been created in the last three or four years. We’re talking about trillions of dollars of welfare and accounting gimmicks to keep these idiots afloat. There will come a time when the banks are a buy. I don’t think we are there yet. I want to see some outright bankruptcies come through so we know these balance sheets aren’t as wrecked as we know they are right now. No, I wouldn’t buy MS.

Q: You have a great service. Can you analyse for me stock CBI, please? It is a tech, but in Oil & Gas industry. CBI – A good company in a very cyclical sector of oil and gas. I’m not a big believer in the oil and gas industry, mainly because I can’t decipher how much of their profits are based on welfare/tax subsidies/etc and I’d rather invest in straight up growth companies and sectors that are as independent of government-subsidization for their business model as possible. Like, say, Apple.

Q: What’s your latest analysis on RVBD? A: RVBD – The company’s positioned very very well in the network as they help big companies get more bandwidth out of their existing networks for a cheap price. That is, there’s an almost immediate return on the investment in RVBD products and that’s a no-brainer for an IT manager. But I sure don’t like seeing all the insider selling followed by a stagnant stock. I’m holding my calls steady but not adding right now.

Q: Dear Cody, I am grateful for the informative and really funny articles! Do you think WFC still has a downward potential, is it worth for shorting at this level? It seems it only follows EU austerity news and actual positive/negative mood of economy environment. Thank you.  A: WFC – I’m a bit worried about the way the stock has been stopped and is bouncing off the mid-low $20s. From a valuation perspective (if you believe their balance sheet disclosures, which I think are a joke) it’s going to be hard to crack from here. I’m holding the very profitable puts we own in it steady.

Q: Any view on brcm? Thanks for all your insights. A: BRCM – With $6 per share net cash on the balance sheets and trading at $36 per share with $3 per share in earnings, next year, you’re only paying about 10x earnings for this very-well positioned company. The problem is that competition is also well-positioned and margins are going to be hard to expand this year and next. Longer-term, this is a great stock and at these levels it’s a very good buy. Revolution Investment rating: 7/10

Q: I am an appreciative subscriber! Cody you put a lot of heart into why are you at this and so there is a strong resonance on the level of politics and social justice and as a athlete and lover of playing sports in my life…what is the next pitch going to be?  Any opinion on qnst? A:

Q: Hey Cody Vin hear, I appreciate the youtube video clips you include in your newsfeeds! I wanted to get your current thoughts and view on GLW. (thinking about jumping in big). A: GLW – A whole bunch of those smartphones and tablets sold this year and next and the next after that will have some Corning glass in them. With nearly $3 per share net cash and with earnings likely to get over $2 per share, up 10% from this year, this stock is cheap at $13 right now. I mean 5x earnings cheap. The big concern is inventory gluts in the TV and non-smartphone/tablet sides of the business. I think that concern is more than priced in at the current quotes. Revolution Investment rating: 8/10


  • Excellent work so far on rough circumstances. I am a long time apple investor and I was wondering how you be playing the options for this.
  • Opinion on playing AAPL now that it’s around 420? Wait for a pullback or jump into some Calls?
  • Thoughts on aapl options?! thanks
  • Oh yes AAPL options, couldn’t have timed it better!!!
  • How much of the current premiums in apple call options are, in your opinion, earnings premiums? You think premiums are going to decrease once earnings are out for AAPL.

A: Regarding AAPL options and trading here. The fact that I’ve been asked dozens of times in the last 48 hours for my opinion about buying AAPL options now that the stock is at 52-week highs is enough alone to keep me from adding to it right now. Holding the AAPL calls I was buying and telling you guys about back when it was $40 lower than the current quote or whatever.

Q: Cody, your thought on MT and any advice for studying short term trading strategies with example like a book or any web site links, Appreciate it very much A: QTM – I’ve seen a lot of great storage/archive services companies come and go over the years. In fact I was hired by the same people who broke Comdisco when they sold it Redline networks or whatever it was called at the time for like $200MM while redline was losing $50mm a year. This QTM is likely another one we’ll see go at some point in the next few years. I’d stay away from it. Revolution Investment rating: 2/10  As far as sites that can help, off the top of my head, I’d suggest where you can read the real-time trading ideas and commentary from some of the Street’s best professional money managers.

Q: I would like your feedbacks on Chinese search engine stocks, such as SOHU, SINA and BIDU. Recently they have huge pullback and just want to see if it is a good time to buy now? Thanks a lot and keep up the good work!


  • SOHU – It’s a Chinese Yahoo with a wireless edge to it. That is, it’s not exactly the dominant Internet play in China (that would be Baidu), but it does have enough of a burgeoning wireless business that there could be some nice upside to the Street’s estimates, which focuses mostly on the traditional Internet businesses at SOHU. With $10 per share net cash and that wireless edge to it, I like SOHU at its 52 week lows here near $60. Earnings should jump from the mid $4s to the mid $5s, giving a 20% plus bottom line growth rate. With a current forward EV/earnings ratio of less than 10x. Revolution Investment rating: 7/10
  • SINA – With $9 per share, $600MM net cash on the balance sheet, this stock would be very interesting to me if it were at about $20 or so. But the company will only earn $1.58 next year. And while that’s a nice growth rate on top of the $1 they’ll earn this year, that’s not enough to get me interested in this also-ran from the China Net world. BIDU is the one I’d prefer.
  • BIDU – As their Finance Yahoo description so modestly puts it, “Baidu, Inc. provides Chinese and Japanese language Internet search services.” Man this is a juggernaut of a company, people. Analysts like to call it “The Chinese Google”, but maybe a more accurate way of phrasing it would be to call Google, “The American Baidu”. At $138 per share and with earnings likely to go from less than $3 this year to close to $5 per share next year, the stock is deceivingly cheap. Revolution Investment rating: 7/10

Q: How about BSX? BSX – See here’s another industry, like oil & gas, that’s way too dependent upon government subsidies/payment systems for me to get interested in it at just about any price. Someday this broke government is going to seriously have to cut corporate welfare programs (all social welfare costs in a given year are about 1/10 of the current spending all corporate welfare at this point) and I don’t want to be investing in one of these types of companies that sell into the corrupted/corporatist/wasteful healthcare government system. I’d rather own, say, Apple.

Q: I have a put spread in infa, would this be a better buy and hold candidate with the cloud movement? A: INFA – The company gets a lot of buzz because it does all those indefinable enterprise networking/data accessing stuff. That is, people love to call it a cloud play and the stock has been flying as a result. The biggest problem with this one is mainly the valuation at these levels. Would you rather pay 30x next year’s earnings for INFA or less than 12x earnings for, say, Apple. That said, the outsized gross margins in this stock certainly provide a lot of earnings leverage if the topline can continue to grow. Revolution Investment rating: 5/10

Q: Thoughts on QNST? QNST – A good play on Internet marketing growth. The question is whether there’s a place for this company in the app/smartphone/iTunes/Android world. We’re not exactly entering a post-Internet phase, because the entire app/smartphone/iTunes/Android eco-system, but QNST’s got its work cut out for it to stay relevant in coming years. At $10 a share and with a balance sheet that’s got a chunk of debt on it, I’m leery. Revolution Investment rating: 4/10

Q: Cody, do you know of any other daily chats that revolve around options and options trading? Your service is very helpful. How about Vistaprint?  A: VPRT – I love Vistaprint the company’s products. So easy to use, very well-designed interface and the ability to put your logo on stuff and/or sell that stuff cheaply means these guys actually have some barrier to entry despite being such a commoditized kind of product/service. At $26 near its 52-week lows and down 50% from its highs, I’m liking it a lot. $5 plus per share net cash and going to earn $2 next year, up from $1.60 this year. Nice set up here for investors and traders. Revolution Investment rating: 8/10

Q:  Thanks for helping me navigate these  horrid markets of late. Do you have an opinion on DMD? A: DMD – Social networking is the next big thing, didn’t you hear?! Sigh. The problem with DMD is that it’s a clear also-ran in the social-networking world. And social-networking, like most things on the Internet, is mostly a winners-takes-all kind of business. So also-rans usually lose out and fade away over time. The company *might* earn up to 40 cents next year. That still makes it a 20x P/E, as the balance sheet doesn’t provide much cushion either. Revolution Investment rating: 3/10

Q: Hi Cody, what do you think about FNSR? A: Optical component stocks have had a heck of a year. Last year at this time, companies like FNSR, OCLR and JDSU were struggling to keep up with demand. FNSR saw it stock price go from under $15 in Sept 2010 to over $46 in March. However, weak guidance in their March earnings report caused the stock to plummet and it took the whole group with it. Rising inventory levels at customer warehouses brought back memories of the early 2000′s bust where inventory gluts crushed these stocks for years. This isn’t the early 2000′s though and insatiable demand for bandwidth, driven by mobile computing and new technologies like Cloud Computing, have soaked up the excess capacity built in the late 90′s. There are indications that the recent inventory worries for these companies may be ending. In FNSR’s last report on September 1st, they guided higher for the current quarter and the stock has made a nice move back up since. Also, an article today in Lightwaveonline indicated that the inventory buildup from the first half of 2011 may be at an end for the group and sales are expected to pick up the 2nd half of the year. Revolution Investment rating: 6/10

Q: Cody, New subscriber here. So far, so good. Thanks for the tip on VIX calls. Opinion on FIO please?  FIO is a newly listed company in the virtual storage field. Fusion IO. Apple co- founder Steve Wosniak is on the board. A: Randy — holy optics! That things been trashed. Down 50% from its highs since the IPO and at a 52-week low today. I’m going to look at this one more in depth. Hmm. Thanks for flagging it for me, it’d been off the radar