We have a lot of stocks up big today, which has been a recurring theme for our portfolio during earnings season so far. Many of our biggest positions are at or near all-time highs. If you haven't done any trimming, consider doing so. Maybe 10% to 20% of some of these biggest winners or about that same amount of some of your most recent big winners.
It's easy to get carried away in the momentum and start feeling invincible when so many of our stocks are so far outpacing the broader markets, which have been struggling all year. In the Trading With Cody Chat Room today, there are a lot of comments like these:
-- SPLK, AMZN, GOOGL, FB are all breaking out.
-- Lots of things working well. We have had great timely trims and great timely buys overall YTD.
-- Good trade on AMBA.
-- YTD has been nice.
-- Sounds like your YTD performance is outpacing that of the S&P!
Just a reminder that it's better to sell when you can, not when you have to. And on that note, I also noticed that my ratings for most of our long positions crept lower this month, as most of our stocks ran higher.
And further on that same note, I am indeed trimming down my Google (GOOG, GOOGL) that I was buying when it was hated, as I wrote on Dec. 18, 2014:
"I am buying a small first tranche of call options in GOOG, dated out into January 2016 with strike prices around $540 or higher. Will add a second tranche to this batch if GOOG were to get hit again in the near term. I'd mentioned I've been thinking about scaling into some more GOOG exposure and this is the approach I'm taking as I already have some common from much lower prices still."
And then I added more Google common stock to my portfolio a couple of weeks after that when GOOG hit $490 per share, writing:
"This will be my last Google purchase for a while, as I now have what I'd consider a large position in the stock and don't want to commit any more capital to it for now."
I've trimmed some Google common and call options in the time since those days when Google was below $500 per share, but it's time to go ahead and do some more trimming. I am selling the last of my GOOG call options that we bought when we saw the sweet pitch in front of us. I'm holding all the rest of my GOOG and GOOGL common stock, much like I have since the day it came public. There will be more of these kinds of pitches and opportunities in days and months ahead. (Google and Facebook are part of TheStreet's Action Alerts PLUS portfolio.)
Here are some very interesting questions from Real Money readers and my best attempts to answer them.
Q: What's your take on investing in commercial real estate (retail, industrial)? Just wondering your general thoughts on risk/reward, metrics to look for, timing, etc?
A: Unless you're in the business of real estate and/or a building company, I think buying land is much better in general investing in industrial or retail real estate. Land can sit and doesn't have any costs to upkeep. Owning buildings and finding leasers and handling maintenance and dealing with taxes and local governments and so on ... sounds more like a job than an investment!
Q: SNE announces they are starting a joint venture in drone development. Is this a good move or a distraction from their content cache?
A: Sony drones aren't a bad idea, and the company's imaging chip sensors could use a successful drone to break into the drone camera industry, which Ambarella (AMBA) completely owns right now. Probably drones won't ever really move the needle for Sony itself, though.
Q: I just finished listening to the Linear Technology (LLTC) conference call. They said their miss and rather large guide down were due to end-demand weakness. Not because of high inventory levels. LLTC is a bellwether for analog semi names as they sell parts to just about everyone. I believe they have 44% industrial exposure and about 22% auto exposure. Any thoughts?
A: End-demand weakness is what leads to inventory gluts. The semi companies that sell to handset and smartphone vendors are struggling, as Samsung's own inventories of both handsets and chips that go into handsets are building because there's soft end demand. Auto and other industrial demand is probably steadier and easier to manage than that of the high-volume handset industry, which has cooled off at least temporarily. The Chinese handset vendors selling cheap smartphones are taking share and the suppliers of those companies are not feeling as much of the softness as the bigger suppliers.
Q: With the roughly divergent performance in iShares Silver Trust (SLV) vs. Market Vectors Gold Miners ETF (GDX) since your recent writings on them, and the way the actual metals have performed, has your contrarian thinking on either/both changed?
A: I didn't expect that SLV would instantly bottom and then bounce back to $20 the day I bought call options. Rather, as always, I started slow and still have lots of room to play with any SLV and/or GDX positions I have. Nothing's changed since I bought the SLV options or the GDX options -- SLV is still at $14-ish and still could potentially rally strongly from these levels in the next eight weeks before my SLV call options expire. GDX is also about where it was when I bought the GDX call options earlier this week and still could pop big in the next four months before those call options expire.