Phil's Newsletter

PSW Top Trades Special Report – 4 Trades with VickreyBrown

GARP is "Growth at a Reasonable Price."

VickreyBrown Investments has teamed up with PSW and we have used their quantitative modeling system to identify 4 of the top value stocks for the 2nd half of 2015.  We began with a list of 50 top candidates that made it through their screener, narrowed it down to a sweet 16 round based on which candidates had the best Fundamentals, which we reviewed one by one in our Live Member Chat Room over the past week and now we're down to the final 4.

While each one, of course, is a good stock pick, we are also going to give examples of how you can enhance the returns for each trade using stock options for both leverage AND risk mitigation, using some of the "BE THE HOUSE – Not the Gambler" methods that we teach our Members at Philstockworld.  

(WYN) Wyndham Worldwide ($85.02) did not make the cut when we selected (HOT) Starwood Hotels as our favorite hotel stock last November at our Las Vegas Live Seminar but it came up on the screener as the sector has pulled back a bit.  HOT ran from $73 to $87 (+19%) before pulling back to $82 while WYN ran from $77 to $94 (22%) before pulling back to $85.  That makes WYN what we like to call a "fresh horse" as it has now pulled back more than HOT and the VB screener confirms  we're ready to get going again.

Back in November I liked HOT (Sheraton, St Regis, W, Westiin, Le Meridien) the best as they focused more on luxury travelers, which were the segment I expected to pick up first.  (IHG) InterContinental Hotels was also in the running but the Holiday Inn part bothered me as I wasn't sure bottom 80% consumers were ready to travel yet.   

WYN is more low-end (Ramada, Super-8, Howard Johnsons) but they did very well out of the gate before settling back to $85, which they have been testing for the past two weeks.  Vickrey's screener is correct as the value of WYN is better than either of the other two with $529M in earnings…
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Weak Bounce Wednesday

Wheeeeee – this is fun!  

There's nothing like a healthy market correction – when you are prepared for it.  Our Members at Philstockworld were certainly ready for this one and now we have our checkbooks ready, looking for bargains to pick up while the prices are falling.  As I said yesterday, not every stock is overbought – just enough of them that we weren't happy about buying at these all-time highs.  

While things were selling off yesterday morning, we added a brand new Top Trade Alert on Encana (ECA) as it tested the $12 level.  During our Live Trading Webinar, we restated our long position on Gold Futures (/YG) at $1,177 and this morning we got out at just under $1,190 for a very nice $400 per contract overnight gain.  That's nothing compared to the $200 per contract we made on oil futures LIVE, during the Webinar, in just 30 minutes. 

Futures trading is a fun way to amuse ourselves while we're waiting for stocks to go on sale.  Being a smart investor is like being a smart shopper as we hunt for bargains and walk around the mall every day in search of discounts.  A lot of times we come up empty-handed but, when we finally go home with something – we feel very good about our purchases.  

As we expected, our bearish Short-Term Portfolio jumped up to +141.6% as the markets dipped.  That's up $20,000 (20%) since our 5/29 Review and all we did last week was cash in winning Silver Wheaton (SLW) calls, add the Gold Trust (GLD) spread we featured for you in the main post on Thursday and pulled our short position on oil (one of 3 legs of the ultra-short (SCO) spread, leaving us net long).  

That's the beauty of following our Balanced Portfolio Strategy – it just takes a few minor adjustments to steer ourselves more or less bullish and to take advantage of the changing conditions.  All that while our Long-Term Portfolio positions continue to work for us by collecting the premiums we sold to others (mostly bulls who have no concept of gravity).  


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Troubling Tuesday – Earnings Manipulation Exposed!

What have I been saying?

Corporations have been FAKING their earnings numbers through Financial Engineering on a record scale.  Now it's not just a conspiracy theory because the Associated Press and Capital IQ have done a study that proves everything I've been saying about earnings this year.  

As I have been saying when we analyzed recent earnings quarters, companies have been presenting misleading versions of their results that ignore a wide variety of normal costs of running a business to make it seem like they're doing better than they really are.  What's worse, the financial analysts who are supposed to fight corporate spin are often playing along. Instead of challenging the companies, they're largely passing along the rosy numbers in reports recommending stocks to investors.

"Companies are tilting the results," says fund manager Tom Brown of Second Curve Capital, "and the analysts are buying it."

As noted by Dave Fry: "Adjusted vs GAAP (Generally Accepted Accounting Principles) earnings have become more accepted now than previously. Decision Point’s Carl Swenlin has been posting the two results side by side for many years.  Unfortunately the financial media and Wall Street analysts have become more willing to accept “adjusted” earning’s results which can mislead analysts and investors alike. Finally the AP has featured the manipulated illusion of these results.  For corporate CFO’s this type of stuff, along with overwhelming cheaply financed stock buybacks have successfully manipulated stock prices."

This sort of thing is not a "victimless crime" that benefits the market in the same way that giving unqualified people sub-prime loans ended up being a catastrophe.  Sub-prime lending inflated housing prices well over their actual value and led to a tremendous crash and inflated profit reports drive up the price of stocks and will eventually lead to a similar correction.  

Analyzing the S&P, Capital IQ found that one in five companies had inflated their profits by MORE THAN 50% and that some of the companies that seem profitable on an adjusted basis are actually losing money.  The adjustments made companies look better by leaving out things like costs related to laying off workers, a decline in the value of patents or other "intangible" assets, the value of company stock distributed to employees, or…
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Monday Market Movement – Bouncing or Bust?

SPY DAILYJust a little correction - so far.  

It's not the 50 dma that should be concerning us – we've tested that plenty of times during this rally  - it's the 200 dma at 2,045 (where the box is on Dave's chart) that is going to be the big point of contention – if we fal that far on the first place.  We haven't tested the 200 dma since January and, before that, it was October's huge drop. 

The first order of bullish business for our indexes is to take back those 50-day moving averages at Dow 18,018, S&P 2,051, Nasdaq 5,005 (hasn't failed yet), NYSE 11,095 and Russell 1,250, which is also holding so far.  Still, 3 of 5 below their 50 dmas is a lot of downward pressure on our indexes and we won't be adding any new bulliush bets until we see at least one of those lines taken back.  

SPX DAILY Asia was mixed this morning or atually all down except the Shanghai, which popped 2% and the Hang Seng, which scratched out a 0.2% gain.  All the rest was red but not too much.  Europe is down actoss the board by 0.5-1% – so that does not bode well for the US open but we are, of course, well-positioned for a sell-off – as it's the one I've been warning you about for a month.  

Not that we weren't able to make money while we waited – 75% of our June Top Trade Review picks are winners already – including our TZA hedge (ultra-short on the Russell) that's on track for a full $10,500 profit if the Russell finishes any lower than 1,250 – that's a nice hedge!  

This is a pretty slow data week so it's all about the technicals for now.  Wednesday is Retail Sales and Import/Export data pre-market  and Thursday is PPI but the real damage is being done in Europe where Greece is spiraling out of control (told you it would) and the DAX is now at 11,085 – down more 10% from the high at 12,390 in April, which is offically considered bearish on the World's 2nd most important National Index.  


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Philstockworld’s Top Trade Review – June

Our new Top Trades Membership has become very popular!  

And no wonder – in our previous review, we looked at the progress of our March Trade Ideas (you have to give them a few months or what's the point?) and 11 of our 13 trade ideas that month were already big winners (up 20% to 750% on cash) and we had called for a cash out at the end of March, so now we're reviewing the "post-cash-out" trade ideas.  

It's good to take a look at what worked and what didn't – especially since those that didn't are often some of our best new opportunities!  It's been a crazy market environment but we try to find at least one Top Trade each week for our Alert subscribers (and, of course, our Premium Members).  I don't force them – I either like a trade enough to feature it or I don't.  

Top Trade Alerts are sent out once or twice a week via EMail and Text Message from our Basic and Premium Live Member's Chat Room.  These trades are just a very small portion of what we discuss during chat each day, but hopefully a good representative sample of the dozens of trade ideas we share with our Members each week in our Live Member Chat Room as well as our Weekly Live Webinars.

Keep in mind these are just snapshots of trades as of today – it's up to you to take good trades off the table and cut the losses (or make adjustments) on ones that go bad.  We're always discussing adjustments in our Live Member Chat Room – join us there for follow-ups.  

March 25th was the day after we called for cashing in the majority of our long positions in the Long-Term Portfolio which, at the time, was up 40.8% over 15 months at $703,885 (we began with a virtual $500,000 on 11/26/2013).  Since then (just over 2 months), we've added another $40,000 in gains, which is a very healthy 8% of our original $500K and outperforming our average long-term monthly gains of 2.5%.  Most of our Top Trade Alerts are for long-term trade ideas.

In our March 25th Alert, we discussed the…
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TGIF – Stop the Week, We Want to Get Off!

Wheeeeeeeeee!

I do so love it when a plan comes together.  It was way back on Friday, May 15th, when the S&P was making new highs at 2,130 that I wrote "Fabulous Friday – All-Time Highs Prove Investors Must Be Stoned."  Since then, we've been grinding back down and yesterday we failed the 50-day moving average at 2,100 – a line we've been watching for quite some time.  

So far, we've played the drop just right as our paired Long-Term and Short-Term Portfolios have held flat since our May 16th Review, which is just fine as we're protecting a 63% combined gain.  We've also been able to put cash to work on new positions (see yesterday's post) and BECAUSE we have plenty of downside protection in our Short-Term Portfolio, we are able to buy with confidence.  

SPY DAILYThe S&P has fallen only 1.6% so far, not much of a correction and we're still expecting a 5-10% correction, back to 2,030 or possibly 1,950 if things get worse in Europe or Asia.  In between, as it has been for the last two weeks, we'll keep making this saw-toothed pattern lower but we won't be excited about any bounce that can't clear the top of that descending channel at this point. 

Meanwhile, we're still on a shopping spree as we do have plenty of CASH!!! on the sidelines and we're finding plenty of bargains as individual stocks fall out of favor.  Yesterday, we began going through a list of 50 strong stocks and have narrowed that down to 15 and two of those have already made our final 4 and we'll have all 4 ready by Monday – so stay tuned! 

Meanwhile, Monday's ARO pick gained another 2.5% yesterday and is now up 15% in 4 days.  Tuesday's FREE trade idea on LL, right from the morning post, had the 2017 $55 calls at $8.50 against the short $25 puts at $10.60 for a net $2.10 credit is now net 0.50, a gain of $2.60 (123%) in 3 days – not bad for a free trade idea, right?  

Wednesday, also right in the morning post, we…
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Falling Thursday – Greece Still Causes Us to Slip

$1,000 per contract!

That's how much our /NKD short idea from yesterday's post made as of this morning.  Not bad for 24 hours "work."  Our short position on the Dow (/YM Futures) only made $500 per contract, as did the S&P Futures shorts (/ES) as that index retested $2,100.  The Nasdaq hit 4,485 and that was good for another $1,100 from our 4,540 short entry – all in all, it has been a good morning for the bears!  

Oil was even better, spiking right back to our $61.30 shorting target on yesterday's oil inventories before collapsing back to $59.30, that one was good for a $2,000 gain and we called the dead bottom on oil in our Live Member Chat Room at 2:00 pm, saying:  "Oil is fun for a long off the $59.50 line for a bounce into the close (/CL)."  That flip flop was good enough to catch a quick $250 on the bounce as well:

We were sure enough about oil failing on inventories that we added an options trade for those Members who weren't able to trade Futures at 10:22, just ahead of the 10:30 report:

For those of you who are Futures impaired, the XOM July $82.50 puts are just 0.65 with a delta of 0.24 so a $1 drop in XOM pays 33% – it's a fun trade to play oil selling off into OPEC.

That trade finished at 3:50 on this note:

Mission accomplished on XOM July $82.50 puts – now 0.88 (up 35%).  Good example of how you can make substitutions for Futures trades (see 10:22 entry).

Having cash on the sidelines doesn't mean we can't make PLENTY of money day-trading in and out of positions while we wait for better opportunities.  On Tuesday morning we featured a bullish idea on LL right in our morning post and, in our Member Chat Room, we added a long on IRBT at $32 (using an options spread for leverage, of course) and a Butterfly Spread (neutral) on TXN at $55.  


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Which Way Wednesday – Greece is the Word (Again)

It's ultimatum time.  

Greek Prime Minister, Alexis Tsipras, heads to Brussels after finding himself boxed into a corner as creditors prepare to deliver a final proposal to end the stalemate over a financial lifeline.  After European leaders and the head of the IMF held secret talks in Berlin on Monday night (without Greece), creditors agreed on a document designed to avert a default that will be presented to Greece.  Tsipras, who said the only plan on the table was one his government submitted, will meet European Commission President Jean-Claude Juncker later today.

I will explain to Juncker that today, more than ever, it’s necessary that the institutions and the political leadership of Europe move forward to realism,” Tsipras said in a broadcast statement in Athens before traveling.  He said there had been no feedback on the Greek proposal.  Four months of sparring and missed deadlines have given way to a greater urgency to decide the fate of Greece, which has about 310 billion Euros ($346Bn) of debt outstanding.  Good luck Alexis – you're going to need it!  

You thought the leaden winter would bring you down forever,
But you rode upon a steamer to the violence of the sun.

Her name is Aphrodite and she rides a crimson shell,
And you know you cannot leave her for you touched the distant sands
With tales of brave Ulysses; how his naked ears were tortured
By the sirens sweetly singing. - Clapton 

The need for a deal is so big, after such a prolonged liquidity crunch, that the relief for the wider public will eventually trump the cost of compromise,” said George Pagoulatos, a professor of European politics and economy at the Athens University of Economics and Business.  This is, perhaps, wishful thinking as the Greek Government has said they can no longer budge on issues like Pension Reductions, Wage Decreases and even tighter Budgets – which are really the only places left to cut at this point.  

Greece's GDP is down 25% over the last 7 years and the GDP of the whole country is just $220Bn, about $21,000 on a per capital basis (11M population).  This is like New York City being $346Bn
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Testy Tuesday – Defying Gravity?

 

It's time to try

Defying gravity

I think I'll try

Defying gravity

And you can't pull me down!

Here's the problem with the markets:  

We're at the point where they simply can't fake this thing any higher.  We've passed any credible stock valuations, even for superstar companies like AAPL and companies like NFLX, TSLA, AMZN, etc. are at ridiculous levels as well.  The resources that are required to maintain the market bubble grow exponentially larger as the bubble grows and expanding the bubble further becomes, at some point, an impossible task – no matter how inspirational your song and dance number is.  

You can fill a pool with water the same way you fill a market with money but, at a certain point, the pool is full and all the water in the World isn't going to bring the level any higher.  All the extra water you keep pumping in is just wasted and spills off the sides and, in fact, begins to cause dangerous damage to the foundations.  That's what all this money-pumping is doing to our markets now – the markets are full of money, back at all-time highs – so why do they keep pumping more and more water in?  

They do it because the pool has a leak and our economy has a leak (recession) and they fear that, if they stop pouring money in, the levels will quickly begin to drop again and people will see the leak for what it is and panic or, even worse, tell them to stop wasting water filling the pool and actually fix the leak instead.

That's not what "THEY" want to happen because "THEY" are the guys who stand at the sides of the pool with buckets and collect the spillover.  "THEY" have no intention of fixing the leak


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Monday Market Manipulation – Another 500Bn Yuan From China Does the Trick

Another day, another $82Bn – or maybe $164Bn.  

That's what Chinese markets are excited about this morning as "people familiar with the matter" say China’s Ministry of Finance may set additional quota of 500Bn-1Tn Yuan for local governments to swap debt into Municipal Bonds, ie – "Project Rug Sweep."  Keep in mind they JUST announced $82Bn on May 15th, just two weeks ago – AND THAT DIDN'T HELP FOR LONG, DID IT?   

Since you can fool some of the people all of the time, the Shanghai Composite popped 4.7% this morning but the Hang Seng found plenty of sellers into its close and finished the day up just 0.63%,  You can't look to the Nikkei to break the tie as they ended up flat but /NKD Futures are back at our shorting line (20,600) and that makes us happy (see our Live Member Chat for our other Futures plays).  

A photo on websiteQuick action was needed in China this morning as the official Chinese PMI report showed slight expansion at 50.2 but the private, HSBC PMI reading showed the 3rd consecutive month of contraction at 49.2 while both the Service Sector and Exports continue to contract at a dangerous pace, so it's lies AND manipulation keeping the Chinese markets alive this morning – not much of an investing premise, is it?  

Of course, $82Bn of additional stimulus is just a drop in the bucket compared to the $550Bn in value lost on the Shanghai Composite last Thursday alone.  Certainly the Government is getting plenty of bang for it's manipulative buck but on May 30th, 2007, the Shanghai also lost 6.5% and, without stimulus, was down 15% by June 4th following a rally that had also been marked by a massive increase in new trading accounts and record margin debt.  

What's different this time is that, back in 2007, the PBOC was tightening to cool off an overheating economy while now the PBOC could not be more accommodating – BUT THAT's WHAT SCARES US!!!  If the PBOC is pulling out all the stops to stimulate the economy but the PMI (and other indicators we discussed last month) ARE STILL FALLING – what's


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Zero Hedge

The Hidden Motives Of The Chinese Silk Road

Courtesy of ZeroHedge. View original post here.

Authored by YaleGlobal Online via OilPrice.com,

China’s Belt and Road Forum, hosted with great fanfare, signals the priority of this flagship connectivity initiative while also underlining its credentials as the new “shaper” of global trends and norms. Exhorting all countries to participate, Chinese President Xi Jinping suggested that “what we hope to create is a big family of harmonious co-existence.”

...



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Phil's Favorites

Sports, Stocks, & the Magic Quadrants

 

Sports, Stocks, & the Magic Quadrants

Courtesy of Wade, Investing Caffeine

Picking stocks is a tricky game and so is sports betting. With the NFL and NCAA football seasons only a few months away, we can analyze the professional sports-betting industry to better understand the complexities behind making money in the stock market. Anybody who has traveled to Las Vegas, and bet on a sporting event, understands that simply choosing a game winner is not enough for a casino to pay you winnings. You also need to forecast how many points you think a certain team will win or lose by (i.e., the so-called “spread”) – see also ...



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Biotech

We have a vaccine for six cancers; why are less than half of kids getting it?

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

We have a vaccine for six cancers; why are less than half of kids getting it?

Courtesy of Electra D. Paskett, The Ohio State University

Early in our careers, few of us imagined a vaccine could one day prevent cancer. Now there is a vaccine that keeps the risk of developing six Human Papillomavirus (HPV)-related cancers at bay, but adoption of it has been slow and surprising low.

Although it’s been available for more than a decade, as of 2014 only 40 percent of girls had received the full three doses of the vaccine, while only ...



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ValueWalk

Bad ROIC Drives Bad Valuation Analysis

By David Trainer. Originally published at ValueWalk.

Return on invested capital (ROIC) is not only the most intuitive measure of corporate performance, but it is also the best. It measures the amount of profit generated for every dollar invested by a company, and has clear links to valuation. No wonder the top buy-side investors increasingly want companies to tie executive compensation to ROIC.

Unfortunately, many investors still rely on...



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Digital Currencies

Bitcoin Buyer Beware

Courtesy of Zero Hedge

Entrepreneurs have a new trick to raise money quickly, and it all takes place online, free from the constraints of banks and regulators. As Axios reports, since the beginning of 2017, 65 startups have raised $522 million using initial coin offerings — trading a digital coin (essentially an investment in their company) for a digital currency, like Bitcoin or Ether.

One recent example, as NYT reports, saw Bay Area coders earn $35 million in less than 30 seconds during an online fund-raising event...



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Insider Scoop

Marveling At Multi-Factor ETFs

Courtesy of Benzinga.

Related This Goldman ETF Keeps Growing Getting Smarter About Smart Beta Related ...

http://www.insidercow.com/ more from Insider

Chart School

Russell 2000 at Rising Support

Courtesy of Declan.

There wasn't much to say about today, but the one index which caught my attention was the Russell 2000. The index caught a bounce in demand at the rising trendline and also did enough to recover the 20-day MA. Traders looking for pullback opportunity could take a look at the Russell 2000. Stops on a loss of 1,397.


The Nasdaq is primed for a move to challenge 6,350. Today's doji marks indecision just below 6,250 but if it can push above this price level it would likely trigger a spate of short covering. Technicals hav...

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OpTrader

Swing trading portfolio - week of June 19th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Mapping The Market

Frontier laid off state Senate president after broadband vote it didn't like

Courtesy of Jean-Luc

Speaking of FTR – not nice people…

Frontier laid off state Senate president after broadband vote it didn’t like

By Arstechnica.com

Broadband provider Frontier Communications recently laid off the West Virginia state Senate president after a vote the company didn't like—and yes, you read that correctly.

West Virginia does not have a full-time legislature, and state lawmakers can supplement their part-time government salaries ($20,000 a year,&...



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Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



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Members' Corner

Robert Sapolsky: The biology of our best and worst selves

Interesting discussion of what affects our behavior. 

Description: "How can humans be so compassionate and altruistic — and also so brutal and violent? To understand why we do what we do, neuroscientist Robert Sapolsky looks at extreme context, examining actions on timescales from seconds to millions of years before they occurred. In this fascinating talk, he shares his cutting edge research into the biology that drives our worst and best behaviors."

Robert Sapolsky: The biology of our best and worst selves

Filmed April 2017 at TED 2017

 

p.s. Roger (on Facebook) saw this talk and recommends the book ...



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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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FeedTheBull - Top Stock market and Finance Sites



About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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