2020 Kick-Off - Reflect But Expect Disruptions

If Regular People Did That Sh!t

Carlos Ghosn – The previous CEO of Nissan must have been watching the movie “Catch Me If You Can”. For those of you not paying attention, he had been jailed on charges related to misusing company funds – a charge alleged by Nissan.  Mr. Ghosn orchestrated an escape out of Japan that truly only rich people can get away with. So regular people if you ever get jammed up, follow what rich people do, not what they say:

First he was not required to wear any electronic monitoring device (smh).  Then Carlos evaded detection and took a high speed train to Japan's Osaka airport to board a private jet.  How do you board a plane when you been accused of damaging Japan's iconic Nissan company - well by jumping into a large speaker box used for concert equipment (remember to poke holes in it like he did or it might not turn out good). From there, the plane went to Turkey and his team got him onto a plane to Lebanon.  Why Lebanon – because Carlos’s game is tight he is a citizen of Brazil, France, and Lebanon. And Lebanon DOES NOT have an extradition treaty with Japan so for now he’s untouchable. To plot and possibly test run this escape, it took months and supposedly hundreds of thousands dollars.  So next time you think you’ve made it, ask yourself is your get outta jail card as good as Carlos Ghosn??

No Photoshop – A Real Look Back

I continually assess my performance to ensure I am reaching my goals and targets. Here is a look back at 2019 and when personally reflecting you have to be real about what worked and did not work. But I always caution patience, look at my list from the previous year end and surprisingly the areas where I decided to push forward paid off.  Here is a quick summary of Items that Did Not Work (in Red) and Nice Surprises (in Green):

·          Colony (CLNY) – Due to poor performance at this company, some investors have called for CEO Tom Barrack to step down. Investor(s) rationale: being a close personal buddy to Donald Trump has caused reputation risk to the company and has been and operational distraction for Tom. Who is the agitator: Blackwells Capital. Outcome: Unclear if it’s a coincidence, Mr. Barrack has named, Marc Ganzi, as his successor and the CEO transition will take place in 2021. 

·          AMC Entertainment (AMC) – AMC is a good example of poor risk management on my part. I had successfully traded this position multiple times for small gains. Using options, I was in a position that allowed me to finally own the stock even though I profess to hardly going to the movies because of the costs and now due to the ease of streaming. All was temporarily well after the most recent earnings call – revenue was up however earnings missed the mark. At first glance I was good, the stock rose and I had a profitable position. Bur the EPS miss may have been signaling a more significant problem - AMC is spending significant mounds of money to fuel the monthly subscription service called Stubs-A-List which is supposed to draw people back into the theatres.  Long story short, I should have done a proper risk assessment. It would have led me to a 5 second conclusion: I think movies are slowly declining business as streaming is the new trend. I think once AMC stops burning cash this stock will do well…but they’ve burned bridges with me. I’ll reevaluate after the next few earnings but this won’t be a long-term position.

·          Retail – This sector will continue to be difficult to trade as retail companies are reeling from too many headwinds: 1) Amazon, 2) China Trade Issues, 3) Changing trends (like working from home and athleisure wear), and 4) decline of malls. So yes my investments into Foot Locker, Kohls, and Stitch Fix were misguided because I thought I could dip my toe into the deep end of a pool for a quick buck and hop out.  However, every time Amazon flexed its muscles or supply chain disruptions were identified in China (from the Trump admin – China trade war in 2019) it was more like jumping in the deep end and remembering you’re not a great swimmer.  The positive is jumping in with Foot Locker, Kohls, and Stitch Fix is like jumping in with 2 experienced swimmers and one newbie who poised for breakout, respectively. At current prices, these stock have likely bottomed and but the rebound will take time.  Business and Life Lesson: Always set limits for short term positions and goals and don't be afraid to adjust or admit failure. If NOT, be prepared for the long-haul.  

·          Moore’s Law – If you’re not familiar with this law you should be. This law theorizes that computer processing doubling every year and I believe that semi-conductor chip makers are sitting in the middle of a revolution – Computer’s are more powerful fueling the Cloud, 5G phones, autonomous cars, gaming, streaming, televisions and the COSTS are coming down across most of these product segments. You’ve seen me dabble in chipmakers: Qualcomm and Qorvo but there are many more like AMD I need to evaluate.  I believe it’s fueling the investment trends of the future listed above and impacts all corners of life. See these examples below:

o    Sports - I joke other areas of our lives are impacted by Moore's law and are racing to reach a most optimal efficient state. Take sports – the games have gotten faster, the players bigger and smarter, the hits – harder, and the focus is now all about DATA analytics. When I used to play Sony Playstation's Madden NFL football game years ago, I always picked a team with a mobile quarterback. Fantasy football – same trend I foresaw years ago the path to racking up passing and rushing yards is through mobile quarterback. The rationale – Football is simple à keep the ball moving forward, limit the sacks and incomplete plays and good things will happen. Well we’ve come along way from Randall Cunningham, Michael Vick, Donvan McNabb and others being an outlier. Look who’s in the playoffs this year: Russell Wilson, Lamar Jackson, Patrick Mahomes, Deshaun Watson, Josh Allen, Ryan Tannehill. They took a theme I knew back in the early 2000s when I would pick Donovan McNabb or Michael Vick in Madden…which was "OPTIONALITY".  Just like in life on every play I wanted options - in football it was the option to Run/Pass/QB run to always gain positive yards.  Funny it took the league over 15 years to catch up to the obvious or wait maybe there was something more holding back the inevitable?  Live your life like water - find the most efficient path and then always give yourself OPTIONS.

o    AfroBeats – I don’t love the name for this music genre but hey I guess if Lil Nas X is not country music who am I to judge. The mix of musical influences is nothing new to life, however; I belive the only thing that holds the flow of music is labels and the radio stations. Moore’s Law to me is like water, life will find its most efficient path and that is happening in music. Everything is FLOWING to streaming, the cloud and to blending sounds. The only people that didn’t get the memo are Country Music execs in their denial of Old Town Road, but strangely I hear there are country rappers now. 👂 But back to the message: Amazing artists have blazed a path just like artists did in in Electronic/EDM when they infused the electronic sound with pop artists (unless you were tripped out...who wanted to listen to music with no words). But now African artists are getting their shine. Not sure what took so long because the music has been so good and so rich for so long (clearly when I would attend African parties or watch music videos during my trips to London). So now I’m happy to see really good artists blowing up mainstream:

§   Davido - Fall

§   Burna Boy – Ye

§   Koffee – Toast

§   AfroBeats – Drogba (Joanna)

§   Wizkid – Come Closer

§   Rotimi – Love Riddim

Props to Akon (Senegal), P Square (Nigeria), Rihanna (Barbados), Nicki Minaj (Trinidad and Tobago), and French Montana (Morocco) for continuing to blaze the trail. Even more than ever, we have African and Carribean infused music being played all across the world. Thanks to the streaming outlets for giving the people what they want. So prepare to be disrupted in your life - it's inevitable. Take Moore’s law and the music industry - disrupted Radio music execs and stations who always want to rinse and repeat music about cash, drugs, and sex now have to compete with the endless amounts of music on YouTube, Streaming outlets and Satellite Radio. This is a good disruption because allowing music to easily get out into public brings variety (and a many bad viral one-hit wonders) but I wouldn't have it any other way.  Our society and culture… are so much more that power being in the hands of few trying to curate our lives one song at a time.

Stay tuned - I'll post soon about the fear of World War III and the impact to your portfolio in case you haven't been watching Oil + Gold prices and stocks skyrocketing

RADISYS - Still Room Before the Buyout

Radisys (NASDAQ:RSYS) -- This is a stock that I've followed and blogged about for many years and for FULL DISCLOSURE: I OWN SHARES OF RSYS

If ya don't know now ya know: Radisys is getting purchased by the largest cell phone provider in India, Reliance Jio.  

I quickly knew something was brewing because my portfolio was up sharply that day and my brother even called and asked if I had heard the good news.  While he was talking about RSYS, I was thinking about the fact that he had actually been listening and occasionally reading stocks I track and blog about.  Most investors LOVE an acquisition...and I'm no different.  Oddly, because I've owned RSYS for awhile I have a little HATER in me because I've bought in at higher prices in the past so I will have a loss on some older positions in my portfolio. 

Breaking Down the RadiSys Arbitrage

Arbitrage...I know technical trading language. So to keep things simple, playing the Arbitrage is like betting on whether the top college football player will get drafted with the 1st pick in the NFL draft.  We all know that it likely to happen BUT every now and then...it doesn't happen. 

RSYS is the like the top draft pick and they are being purchased for $1.72 in cash as stated in new releases and in the latest earnings conference call by the CEO.  The stock traded today at the $1.48 level EVEN THOUGH we all know they will be purchased (drafted with the top pick) for $1.72.  Buying the stock now is like getting in on a poorly kept secret -- "The Arbitrage".  But before I pull the trigger on a 16% gain, I have to weigh the risks (ughh sounds like I'm still working):

Geopolitical (Country) Risk: Believe it or not, I had to consider whether either company's government may get involved in nixing the deal. RSYS (American), Reliance Jio (Indian) - I think it's unlikely to get nixed but it should be considered as the proposed deal of NXP Semi & Qualcomm got the backhand from China likely due to their beef with the Trump Admin over tariffs (their deal never got approved).

Financial Risk: I see limited risk here, as it's a very small deal ($74M) and it's all CASH. Reliance being the largest cell provider in India seems to be able to easily close this deal.

Timing Risk: It was announced the deal will close in Q4 2018. It's August, so 1 quarter is not too lengthy in the corporate world for an acquisition.

Upsides: Another buyer could cause a bidding war but this scenario seems unlikely as no one else has come forward. Surprisingly, the latest earning report was very positive so you wonder if the deal could be sweetened.  It's unlikely as RSYS was a penny stock prior to the acquisition.

It's hard to call the last indicator Upside risk but I did want to point out that the CFO bought a large share of stock a few months back which was a very bullish sign.  It's what caused me to follow this stock closely over the last months but sadly I had analysis paralysis and didn't follow my gut which was telling me to load up after that recent indicator.  My final thoughts are this all cash deal will go through and a 16% spread is an opportunity for a moderate gain with limited risk. 

The Plan - Can the Economy Grow Forever?

I often talk about the Pillars that act as a beacon guiding my life, business, and financial decisions so I like to revisit those from time to time.

                 Urbanomics Pillars: “Spiritual”, “Financial”, “Physical”, and “Mental”

We often preach about balance and diversification in the financial world but how often do people consider this in their day to day loves.

Financial –

I’ve been moving comma’s so don’t start no trouble with me…

I hear you Drake, keep moving those commas. My mission is to do the same while helping people in the process. But before I get started I’d like to remind people of the incident at Starbucks this past week. Can you imagine getting kicked out of a coffee shop just because of the color of your skin…and my response is YES.  Those young gentlemen were having a business meeting, trying to move comma’s but trouble, haters…and risk interrupted their lives.  This is not an isolated incident for many of us so I ask for them to stay strong and rely on their other Pillars for balance and keep pushing forward.  Here are my views on all things financial:

Stock Market - Again, you won’t find me writing much about the stock market these days because things are steady. I said a few years ago, when Mohammed El-Erian described this economic period that we are in as the “New Normal”, that I thought we would continue to bump along higher and higher coming out of the near depression period of 2008. So the goal has been to find amazing stocks at discounted values and when they rise, part way above your target level...part ways with them.  Why because we are in the 9^th YEAR of an economic rally (soon to be the longest in history). I’ve learned over time from Mohamed, Warren Buffett, and others to try to keep it simple. So find stocks you like, determine what is the ideal price you would buy it at…sometimes take another 5% of that number and wait to see what happens J

Remember Lululemon recommended in the 40s, Apple in the 90s, Alibaba in the 80s, Caterpillar in the 80s, Manchester United @ 14 if not use the search tool and track these old friends of mine down. I still holding Apple, Alibaba, and Manchester United as core holdings and am learning how to protect these holdings as they've appreciated nicely. So to the many people that say growth has dominated the market in recent years I agree but I remind them…for me it’s the long game and how much you bought something for and amazing even a few growth stocks like Apple and Alibaba will fall into your lap.

And for the people that trust in the process, support others, call out injustice when they see, and pay it forward here’s what I’ve been trading.  It’s my way of giving back…my free and very simple knowledge. A chart is included below and simply represents prices where I’ve had success trading these stocks over the last three to six months. The Column on the left are shares I've owned and traded options in. The column on the right I’ve just traded options only. The asterisk means I still own the stock:

Note: Please find the correct spelling for Qorvo 

More to come on how I'm planning for the future (real estate, biz development, taxes) as the soon to be longest economic rally history WON"T last forever. And yes...I was channeling Drake’s hit song God’s Plan when I was developing this post and was equally inspired by Kendrick Lamar and Jay-Z’s recent projects and social consciousness. Many blessing to them and to you all.  And if you haven’t seen the video, of course I recommend that you check it out here:

Reader Response – Qualcomm, Apple, AT&T

Thank you reader for holdin’ the West Coast down and keeping up with my blog and some of the big names in the stock game. Here is my response to your comment from the June 1 Stocks and Locks post:

Qualcomm – Being that my strategy normally addresses momentum plays QCOM has definitely been on my radar. But trying to catch QCOM is like a magician trying to catch falling knives…it might look like magic until you need surgery. QCOM recently got pimp slapped by the US International Trade Commission, who voted to partially ban phones imported to the US with chips involving an ongoing dispute with Broadcom. So sorry to break the news but:
1. ITC ban will affect QCOM’s bottom line
2. Any possible licensing agreements cripple QCOM business (kinda like Snoop’s character in Training Day)
These two things indicate this is a poor momentum play in the near term. The only positive thing that QCOM has on its side, is that so many US wireless carriers use phones with QCOM chips in it. They will lobby on behalf of QCOM to remove the ban. So unless you’ve got some friends at the ITC I would stay away from this stock until more news is released. The good short term momentum play here is Broadcom (BRCM). Broadcom stands to gain the most through an outright ban or some possible settlement or licensing agreement. And I will give you one more Urbanomic head’s up…check out the executives at the company. More than one executive in the last week has sold the stock playa!! They to are taking their money and running until this blows over!!!!

AT&T – I’ll make this one short because there is a lot of hype surrounding the I-Phone. That would normally be good for my momentum strategy of beaten down stocks…but the trick is you need to know something that the rest of the public doesn’t know. I would argue the run up in AT&T may already reflect the growth from the new I-Phone. Secondly, T isn’t a pure play in wireless…you’ve got broadband and fixed line businesses that also impact earnings. I will tell you when evaluating T, one important factor to look at is churn rate. They are second in the major 4 wireless carriers in keeping their customers which is good, but they haven’t been adding new customers at an alarming rate. So you will probably point at that the I-Phone will increase subscribers with over 1 Million people already on a wait list. I concur with your comment but also point out that you don’t know how many of those customers are already AT&T customers (which boasts to have one of the largest wireless customer bases). So with that unknown variable and the fact that this product will sell out because Apple (AAPL) wants to sustain the hype by not flooding the market…there won’t be that much new subscriber growth. I do believe their will be that growth in the future but for now AT&T is a long term play. Look for a short pop around the release of the phone for a quick play but your best bet is to wait for some pullback and load up on this stock for the long haul.

Apple (AAPL) I think you are asking about AAPL not APPL. So I will analyze Apple. This is the Wall Street darling that everyone has an opinion about and some of us missed the great ride. I will admit I thought the I-Pod was going to be a novelty item and it steam rolled AAPL to consecutive quarters of great earnings. Now the I-Phone is poised to do the same. But as you read in my analysis on AT&T, I think AAPL already reflects some of the value from the I-Phone. Again with a limited number of phones being produced initially the only thing AAPL stands to gain from is the pricing power. They are selling the phones for $499 and $599. Lastly, find out how well received their new operating system upgrade will be. I do believe AAPL still has room to run, but wait for a pullback in the stock and ride the I-Phone and OS upgrade wave to higher earnings.