Editors Note:

The market crash on the China trade news caused multiple disruptions. This was the second consecutive week where we lost multiple positions because of market instability. It was not a stock story but simply a market story pushing everything lower.

I am particularly agitated about the LYFT put position we lost on April 3rd at $62.50. Shares of LYFT closed at $51.09 on Friday. I knew it was going to tank on earnings and the UBER IPO but we were stopped out on the 3rd. Sometimes even if you "know" something is going to happen you have to take the exits because nothing is ever guaranteed.



Current Portfolio


Stop Loss Updates

Check the graphic below for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline.


Profit Targets

Check the graphic below for any profit stops in green. We need to always be prepared for a profit exit at resistance.





Current Position Changes


TDOC - Teladoc
The long position was entered at the open on Monday.

USO - US Oil Fund
The long position was entered at the open on Monday.

ADSK - Autodesk
The long position was stopped in the market crash.

CSCO - Cisco Systems
The long position was stopped in the market crash.

NTGR - Netgear
The long position was stopped in the market crash.


BULLISH Play Updates

ADSK - Autodesk - Company Profile

Comments:

No specific news. Shares crashed with the market to stop us out.

Original Trade Description: April 27th

Autodesk, Inc. operates as a design software and services company worldwide. The company offers AutoCAD, a professional design, drafting, detailing, and visualization software; AutoCAD Civil 3D, a surveying, design, analysis, and documentation solution for civil engineering, including land development, transportation, and environmental projects; AutoCAD LT, a professional drafting and detailing software; BIM 360, a construction management cloud-based software; computer-aided manufacturing (CAM) software for computer numeric control machining, inspection, and modelling for manufacturing; Fusion 360, a 3D CAD, CAM, and computer-aided engineering tool; and Industry Collections software products for professionals in architecture, engineering and construction, product design and manufacturing, and media and entertainment industries. It also provides Inventor tools for 3D mechanical design, simulation, analysis, tooling, visualization, and documentation; Maya and 3ds Max software products that offer 3D modeling, animation, effects, rendering, and compositing solutions; and PlanGrid, a cloud-based field collaboration software, which provides general contractors, subcontractors, owners, and architects access to construction information in real-time. In addition, the company offers Revit software for building information modeling; and Shotgun, a cloud-based software for review and production tracking in the media and entertainment industry. Autodesk, Inc. sells its products and services to customers directly, as well as through distributors and resellers. The company was founded in 1982 and is headquartered in San Rafael, California. Company description from FinViz.com.

Analysts are positive on Autodesk saying they are well positioned in the growing sector and bookings are strong. Autodesk has around two million legacy users and about 12 million "noncompliant" users, which should be relatively easy to monetize. Noncompliant means they are on previously purchased software that has expired. In order to upgrade they will need to subscribe to the new subscription-based software, which provides ongoing revenue for Autodesk.

Keybanc just gave Autodesk a buy rating and $196 price target.

Earnings May 30th.

Shares have overcome a mid-April market related dip and closed at a new high on Friday but not yet a breakout.

Position 4/29:
Closed 5/9: Long June $185 call @ $6.50, exit $4.02, -2.48 loss.
Optional:
Closed 5/9: Short June $200 call @ $2.35, exit $1.50, +.85 gain
Net loss $1.63.


CSCO - Cisco Systems - Company Profile

Comments:

No specific news. Shares crashed with the market to stop us out.

Original Trade Description: April 19th

Cisco Systems, Inc. designs, manufactures, and sells Internet Protocol (IP) based networking and other products related to the communications and information technology industry worldwide. The company offers switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points, and servers; and next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice, and video applications. It also provides collaboration products comprising unified communications products, conferencing products, collaboration endpoints, and business messaging products; data center products, such as blade and rack servers, series, fabric interconnects, and management software solutions; wireless products consisting of wireless access points, WLAN controllers, cloud and appliances based services, and integrated software services. In addition, the company offers security products, including network and data center security, advanced threat protection, Web and email security, access and policy, unified threat management, and advisory, integration, and managed services; and other products, such as emerging technologies and other networking products. Further, the company offers a distributed file system for hyperconvergence that enables server-based storage systems; service provider video software and solutions; and technical support services and advanced services. It serves businesses of various sizes, public institutions, governments, and service providers. The company sells its products directly, as well as through channel partners, such as systems integrators, service providers, other resellers, and distributors. The company was founded in 1984 and is headquartered in San Jose, California. Company description from FinViz.com.

It appears that everyone is moving to the subscription model for software after the success of companies like Adobe in moving from a sales to a license subscription model. Microsoft Office, Autodesk, even BlackBerry is moving to a subscription model.

Cisco is moving to a subscription model on their highest capacity routers and switches. These devices cost from tens of thousands of dollar to hundreds of thousands. These are Cisco's highest capacity and smartest devices. However you need a masters in device programming to make them work correctly. With cyber security threats growing daily, enterprise users want to be able to stop the majority of the threats at the router level.

Cisco now sells multiyear software as a service (SaS) subscriptions for these top of the line devices. The CEO said the unbilled revenue for SaS subscriptions was their fastest growing revenue line item even though it is not on their books. If someone signs a 3-year service contract, Cisco can only recognize the revenue from the current quarter, and then defers revenue for the rest of the fiscal year. The revenue in future years is not disclosed. Deferred and unbilled revenue was up 28% for the quarter and she said unbilled portion was the largest component.

In late March the company reported earnings of 73 cents that beat estimates for 72 cents. Revenue of $12.45 billion beat estimates for $12.42 billion. They guided for the current quarter for earnings of 76-78 cents on revenue of $12.96-$13.21 billion, a 4-6% increase. Analysts were expecting 76 cents and $12.84 billion. They also raised their dividend 6% to 35 cents and added $15 billion to their stock repurchase program.

Because of the 4.7 billion outstanding shares, the options are inexpensive and we can reach out to 2020 and capture all of the 2019 gains.

Earnings May 15th.

Because of my concerns about a potential decline after new market highs, I want to use a short-term May option that expires just after earnings. When we get to the May 15th earnings we will decide if we want to hold over. The option is cheap enough it might be worth the risk, depending on what the stock does between now and then.

Position 4/22:
Closed 5/6: Long May $57.50 call @ $1.02, exit .24, -.78 loss.


NTGR - Netgear Inc - Company Profile

Comments:

No specific news. Shares down with the market to stop us out.

Original Trade Description: April 27th

NETGEAR, Inc. designs, develops, and markets networking and Internet connected products for consumers, businesses, and service providers. It operates in two segments, Connected Home, and Small and Medium Business. The company offers smart home/connected home/broadband access products, such as broadband modems, WiFi gateways, WiFi hotspots, WiFi routers and home WiFi systems, WiFi range extenders, Powerline adapters and bridges, WiFi network adapters, and digital canvasses; and value added service offerings, including technical support, parental controls, and cybersecurity protection. It also provides Ethernet switches, wireless controllers and access points, unified storage products, and Internet security appliances for small and medium-sized businesses. The company markets and sells its products through traditional retailers, online retailers, wholesale distributors, direct market resellers, value-added resellers, and broadband service providers in the Americas, Europe, the Middle-East, Africa, and the Asia Pacific. NETGEAR, Inc. was founded in 1996 and is headquartered in San Jose, California. Company description from FinViz.com.

Netgear reported adjusted earnings of 60 cents that more than doubled the 26 cents in the year ago quarter and beat estimates. Revenue rose only slightly from $245 to $249 million. However, they guided lower for Q2 because of a slight decline in shipments to "service-provider" customers. Gross margins will decline from 9% to 4.5% in Q2.

While that is negative there are positives. They have been very successful in rolling out their Orbi WiFi mesh systems and Nighthawk Gaming products to end users. Their paid subscription services offering now has more than 10.4 million subscribers.

They are also rolling out their new WiFi 6 routers in May to coincide with the launch of smartphones and laptops with the WiFi 6 protocols. Part of their lowered gross margin is additional marketing spend on these new products.

Shares fell nearly $6 on the earnings but I believe the drop was overdone and a rebound will appear to capture the new product cycle.

Earnings July 24th.

Position 4/29:
Closed 5/9: Long June $32 call @ $1.10, exit .50, -.60 loss.


TDOC - Teledoc Health - Company Profile

Comments:

No specific news. This was the best performing stock of the week with gains on some days and only a minor decline on Friday.

Original Trade Description: May 4th

Teladoc Health, Inc. provides telehealth services. It offers a portfolio of services and solutions covering 450 medical subspecialties, such as flu and upper respiratory infections, cancer, and congestive heart failure. The company provides its services through mobile devices, the Internet, video, and phone. It serves employers, health plans, health systems, and other entities in approximately 100 countries worldwide. Teladoc Health, Inc. has a collaboration with Cincinnati Children's Hospital Medical Center to develop a consumer pediatric telehealth platform. The company was formerly known as Teladoc, Inc. and changed its name to Teladoc Health, Inc. in August 2018. Teladoc Health, Inc. was founded in 2002 and is headquartered in Purchase, New York. Company description from FinViz.com.

Teladoc is a subscription medical service where you can access a live doctor almost at will for $49 a month. Business is booming.

Q1 revenue rose 43% from $89.6 million to $128.6 million. They still posted an earnings loss because they are in customer acquisition mode. Long-term the subscription model will be a money maker. US paid memberships rose 28% to 26.7 million.

Subscription revenue in the US grew 33% to $81 million. International revenue more than doubled to $30 million. Gross margins were 65.3%. The cash on hand at the end of the quarter was $480 million.

Some insurance companies cover the Teledoc fees. An individual pays $49 a month for a suite of services that includes unlimited doctor consultations. US visit-fee-only access, which are users not covered by insurance, rose 7% to 10.2 million. Total global visits rose 75% to 1.06 million.

When you consider all the hassle of making an appointment with your regular doctor, driving to the appointment and back and waiting an hour in the office to see the doctor for 5 minutes, this seems like a bargain. A patient can pick up their phone and be talking to a doctor in minutes. If they have a video camera on their phone or computer, they can talk face to face, which is handy if you have some external affliction.

What does a normal doctor visit consist of other than blood pressure, pulse, sometimes temperature and a lot of waiting for the doctor to walk in for 5 minutes and write a prescription and leave.

The company affirmed full year guidance of $535-$545 million, a 29% boost in revenue. Adjusted EBITDA of $25-$35 million.

Position 5/6:
Long July $65 Call @ $3.30, see portfolio graphic for stop loss.
Optional: Short July $75 Call @ $1.40, see portfolio graphic for stop loss.
Net debit $1.90.


USO - US Oil Fund - ETF Profile

Comments:

Oil was dead flat for the week despite Iranian and North Korean headlines. Summer is coming.

Original Trade Description: May 4th

The United States Oil Fund LP (USO) is an exchange-traded security designed to track the daily price movements of West Texas Intermediate (WTI) light, sweet crude oil. USO issues shares that may be purchased and sold on the NYSE Arca.

The investment objective of USO is for the daily changes in percentage terms of its shares' NAV to reflect the daily changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the daily changes in price of USO's Benchmark Oil Futures Contract, less USO's expenses.

USO's Benchmark is the near month crude oil futures contract traded on the NYMEX. If the near month futures contract is within two weeks of expiration, the Benchmark will be the next month contract to expire. The crude oil contract is WTI light, sweet crude oil delivered to Cushing, Oklahoma.

USO invests primarily in listed crude oil futures contracts and other oil-related futures contracts, and may invest in forwards and swap contracts. These investments will be collateralized by cash, cash equivalents, and US government obligations with remaining maturities of two years or less.

The USO rallied to nearly $14 in mid-April as WTI prices moved to $65. Oil prices tend to peak around Memorial Day and hold that level or slightly higher into the July 4th weekend.

We found out this weekend that one million bpd of Russian oil will be offline for the next couple weeks and that will squeeze global supply. We are also only two weeks past the elimination of waivers on Iranian oil and that removed another million barrels from the market. Turkey and China are the only two countries to defy the sanctions and continue purchases.

The stage is set for a potential oil rally back over $65. That would put the USO back near $14 or higher depending on what kind of ramp we get into Memorial Day and the beginning of the driving season.

I am recommending we buy an inexpensive July call option and target a 100% return over the next couple weeks.

Position 5/6:
Long July $13.50 call @ 39 cents, no initial stop loss. Target 85-cents to exit.


BEARISH Play Updates

No Current Puts