Green Mountain: Q2′s Dog and Pony Show Reveals More Accounting Fluff
by Insider Scoop - May 4th, 2011 3:45 pm
Swallowing pride is a lot harder than sipping a freshly brewed cup of Green Mountain Coffee – 20% hotter today. Here’s a post byJason Merriam on Seeking Alpha, who’s content to "gaze at the big ‘ol Green Mountain from a safe distance." - Ilene
While pride can be hard to swallow at times, panning a stock only to watch its share price skyrocket 20% above and beyond the previous 50% gain we didn’t think possible is downright humiliating. So, congratulations to all Green Mountain Coffee Roasters (GMCR) longs! May the java be with you.
Humble pie aside, investors were clearly impressed by the earnings beat and remainder of 2011 guidance offered by management Tuesday.
We have been bearish on this company for quite awhile and admittedly wrong about the stock since it was at $40 a share.
Yet, we have to hand it to GMCR management for their keen ability to captivate shareholders with such bright optimism while slipping in a secondary offering only minutes within releasing Q2 earnings.
[...]
Again, we have to tip our hat to GMCR management. Now, they have a rich $9 billion market cap, their timing of a secondary, remarkably uncanny. Granted, it’s only about 5% of total current outstanding, but it’s a very shrewd maneuver to build one’s currency (much thanks to bulls). It’s one of the slickest capitalization maneuvers we’ve seen in quite a while.
[...]
If management is so optimistic, why have they sold almost 290,000 shares in the past 12 months?
More here: Green Mountain: Q2′s Dog and Pony Show Reveals More Accounting Fluff – Seeking Alpha.
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DiggDARK HORSE HEDGE – Super Rad, RDWR
by ilene - December 6th, 2010 11:58 pm
By Scott and Ilene at Dark Horse Hedge – Super Rad, RDWR
All systems go
Soon the world will know
The fury of attack
Feel the wrath of
The super rad super rad super rad
Su-per Rad! – Aquabats
Scott came up with this song; it’s hard to believe, but he managed to find a song to fit the post "Super Rad" and I won’t say anything about "Super Bad," I’ll leave that up to you. More from Scott…
We are feeling pretty super about Radware Technology (RDWR) after a 21% surge on Monday to $39.77. The virtual Dark Horse Hedge (DHH) portfolio bought 100 shares of RDWR on November 11, 2010 at $33.39. Using Phil’s Buy/Write strategy, DHH sold 1 March 2011 $35 Call for $3.30 and 1 March 2011 Put $5.10, taking in a total of $8.40.
One strategy at this point would be to sit still and keep the $8.40 option premium, and let the shares be called away at $35 for an additional $1.61 profit (total profit $8.40 plus $1.61 = $10.01) But at DHH we “feel the wrath of the Super Rad” and would like to potentially enhance our return on RDWR given the suggested buyout price of $47. Our virtual DHH portfolio will buy back the Mar 2011 $35 Call at the open, Tuesday, December 7, 2010 (at approximately $6.75) and sell the Jan 2012 $35 calls (approximately $9.25). The added time element will be moot in a buyout as all positions would be settled at the time of acquisition. The Put should expire worthless in this scenario so there is no need to do anything with it. There is a rumor that HP may also be interested in acquiring RDWR which could cause a bidding war with Riverbend, if those rumors are indeed true.
Buy (back) RDWR Mar $35 call at the open, Tuesday, December 7, 2010
Sell RDWR Jan 2012 $35 call at the open, Tuesday, December 7, 2010
“Sell the News” Bearish Flattening of Yield Curve Continues; Reflections on “Relative Value”
by ilene - December 1st, 2010 7:16 pm
Continuing on the theme of stock market prices vs. real fundamental value, Mish writes: "This is what happens when investors chase "relative value" instead of asking if there is any real value at all…[This] applies to those chasing the stock market at these lofty levels on the basis ‘stocks are cheap relative to treasuries’ or some other nonsensical reason to justify valuations." – Ilene
Courtesy of Mish
Curve Watchers Anonymous notes a continuing bearish flattening of the yield curve as shown in the following chart.
click on chart for sharper image
A bearish flattening occurs when the curve tightens with yields generally rising. Conversely, a bullish flattening occurs when the curve tightens with yields generally falling.
Since early November, 5-year treasury yields have risen about 60 basis point, 10-year yields about 45 basis points, and 30-year treasury yields have risen perhaps 5 basis points.
Once again we can see the results in today’s action with thanks to Bloomberg.
Buy the Rumor Sell the News
Note the continued unwind of the "sure-thing" treasury bet, with the Fed concentrating its purchases in the 3-to-7-year range hoping to drive down rates, and everyone front-running the trade. That trade is now unwinding.
Clearly this reaction is not what Bernanke wanted at all.
Reflections on "Relative Value"
Check out that .81 yield on 3-year treasuries. On October 18, investors scarfed up $750 million of 3-year Walmart Bonds yielding .75% for the stupid reason they yielded more than treasuries. Now treasuries are yielding more.
This is what happens when investors chase "relative value" instead of asking if there is any real value at all.
The same idea applies to those chasing the stock market at these lofty levels on the basis "stocks are cheap relative to treasuries" or some other nonsensical reason to justify valuations.
There is no value, only unwarranted bullishness.
Originally published at Mish’s Global Economic Trend Analysis, "Sell the News" Bearish Flattening of Yield Curve Continues; Reflections on "Relative Value".
One More Cup of Coffee Addendum
by Sabrient - October 21st, 2010 4:03 am
One More Cup of Coffee Addendum
By Scott Brown at Sabrient, Ilene at Phil’s Stock World, and special thanks to Sam Antar
Last night, we decided to replace the short in JOE, covered yesterday, with a short in GMCR for the DHH virtual portfolio. We noted:
There are many reasons that insiders may sell shares which have nothing to do with their perception of the company’s prospects or valuation. However, when a week after the last insider sale, the company discloses that the SEC is inquiring into the company’s methods for accounting for revenues, it starts to look more dark and mysterious. It is worth noting that Keurig accounted for over half of GMCR revenue last year, so when the President of Keurig is selling, it is worth a further look. When the SEC discloses an inquiry into the companies accounting it is worth more than a look. Multiple class-action lawsuits have been filed against GMCR since the announcement by the SEC, yet the stock has rebounded from a low of $26.87 to a close today of $31.31. Rumors of Nestle having interest in GMCR resurfaced on October 12, despite the SEC’s inquiry and pending class-action lawsuits.
To further examine our initial observation, we took a guided tour though the SEC filings, with Sam Antar, who specializes in reviewing SEC filings. The first thing we discovered on the SEC site was that the last date Michelle Stacy exercised 5000 options and then sold the stock for $37 was September 21, 2010. This transaction was reported in a Form 4 filing on Sept. 23, 2010.
Next, we looked at the most recent 8K Form filed and we found that the disclosure of the SEC inquiry occurred on September 28, 2010. However, notification of the SEC inquiry occurred eight days earlier, on September 20, 2010:
On September 20, 2010, the staff of the SEC’s Division of Enforcement informed the Company that it was conducting an inquiry and made a request for a voluntary production of documents and information. Based on the request, the Company believes the focus of the inquiry concerns certain revenue recognition practices and the Company’s relationship with one of its fulfillment vendors. The Company, at the direction of the audit committee of the Company’s board of directors, is cooperating fully with the SEC staff’s inquiry.
This information…
One More Cup of Coffee Addendum
by ilene - October 21st, 2010 3:41 am
One More Cup of Coffee Addendum
By Scott Brown at Sabrient, Ilene at Phil’s Stock World, and special thanks to Sam Antar
Last night, we decided to replace the short in JOE, covered yesterday, with a short in GMCR for the DHH virtual portfolio. We noted:
There are many reasons that insiders may sell shares which have nothing to do with their perception of the company’s prospects or valuation. However, when a week after the last insider sale, the company discloses that the SEC is inquiring into the company’s methods for accounting for revenues, it starts to look more dark and mysterious. It is worth noting that Keurig accounted for over half of GMCR revenue last year, so when the President of Keurig is selling, it is worth a further look. When the SEC discloses an inquiry into the companies accounting it is worth more than a look. Multiple class-action lawsuits have been filed against GMCR since the announcement by the SEC, yet the stock has rebounded from a low of $26.87 to a close today of $31.31. Rumors of Nestle having interest in GMCR resurfaced on October 12, despite the SEC’s inquiry and pending class-action lawsuits.
To further examine our initial observation, we took a guided tour though the SEC filings, with Sam Antar, who specializes in reviewing SEC filings. The first thing we discovered on the SEC site was that the last date Michelle Stacy exercised 5000 options and then sold the stock for $37 was September 21, 2010. This transaction was reported in a Form 4 filing on Sept. 23, 2010.
Next, we looked at the most recent 8K Form filed and we found that the disclosure of the SEC inquiry occurred on September 28, 2010. However, notification of the SEC inquiry occurred eight days earlier, on September 20, 2010:
On September 20, 2010, the staff of the SEC’s Division of Enforcement informed the Company that it was conducting an inquiry and made a request for a voluntary production of documents and information. Based on the request, the Company believes the focus of the inquiry concerns certain revenue recognition practices and the Company’s relationship with one of its fulfillment vendors. The Company, at the direction of the audit committee of the Company’s board of directors, is cooperating fully with the SEC staff’s inquiry.
This information…
DARK HORSE HEDGE
by ilene - July 18th, 2010 10:57 pm
DARK HORSE HEDGE 7-18-10
By Scott at Sabrient and Ilene of PSW
Friday gave us a real-time example of why we use Hysteresis* and confirmations from our technical signals, MACD 12-26-9 and RSI 14-day, to select and monitor the tilt (long-short ratio) of the Dark Horse Hedge’s portfolio.
The SHORT tilt Friday allowed us to make +1.37% from our 6 SHORT, 3 LONG positions while the S&P 500 gave back -2.88%. The economic data out Friday of course played a large roll in the failure of our indicators to turn from short to BALANCED. A sharp decline in the University of Michigan Consumer Index to 65 in July compared poorly with a June figure of 76 and Briefing.com’s estimate of 74.5. Google’s earnings miss didn’t help either as the S&P 500 fell through its short-term support area to close at 1064.88. The MACD reading is currently at -3.56 and RSI 14-day at 42.85 (bullish signal is above 50). The preponderance of evidence heading into the July 19 week is that the market needs to find support in the 1040 range.
Despite the poor economic data that pushed the market lower on Friday, 19 of 23 S&P 500 companies reporting thus far reported better than projected EPS, and 15 of them beat revenues as well.
Earnings reports will continue to flow in this week. In our portfolio Western Digital Corp (WDC, long position) reports profits on Tuesday while USG Corp (USG, short position) and Sun Trust Banks Inc (STI, short position) report their losses on July 22. We will continue to monitor the market action and look for guidance on entering new positions. Key support areas appear to be 1040, 1022 and then 995.
Dark Horse Hedge maintains 10% cash for swing trade opportunities and we are highlighting one for entry on Monday at the Open.
SHORT Terex Corp. (TEX) at the Open Monday.
TEX will report its latest loss figures on Tuesday, July 21. Twenty analysts project losses ranging from -$.15 to -$.44 with an average of -$.30. Looking back over the last four quarterly announcements, we see analysts often underestimate Terex’s losses. For example, in March 2010, analysts estimated -$.52 while the actual loss was $.64. In December 2009, analysts targeted -$.49 and TEX delivered -$.89. In September 2009, the loss was projected to be $.34 and the company came in at -$.77. In June 2009, investors were…
Something to Love about GSK
by ilene - June 23rd, 2010 4:29 pm
Something to Love about GSK
Courtesy of Pharmboy
Visit Pharmboy here for his previous articles on pharm/biotech stocks and chapters in his TA book.
UK-based GlaxoSmithKline was ranked as the world’s fourth largest player in 2009 (behind US-based Pfizer, France-based Sanofi-Aventis and Switzerland-based Novartis) based on prescription pharma sales. The company was founded in 2000 via the merger of Glaxo Wellcome and SmithKline Beecham and is headquartered in Brentford, London, UK. I wrote about GSK in my first PSW write-up in 2009.
In terms of its therapeutic focus, GSK owes its market-leading position in the global respiratory market to the Glaxo Laboratories legacy. Over 30 years ago, Glaxo launched Ventolin for the treatment of asthma and developed and launched Serevent and Flixotide in 1990. A combination of these two compounds—sold under the brand names Seretide/Advair ($7.8B in 2009). Similarly, GSK’s origins in the CNS market—currently its third largest therapeutic area of focus—can be traced back to the Wellcome and SmithKline scientists. Other therapeutic areas of importance include infectious disease and virology (vaccines).
What GSK has done instead is sought to in-license product rights in order to boost the sales potential of its portfolio. Of the eight products launched by GSK since 2000, four have been in-licensed (Lexiva from Vertex, Levitra from Bayer, Boniva from Roche and Vesicare from Astellas). However,
…
Rock Solid Yield: What others are suggesting for Solid Yielding Stocks.
by ilene - June 11th, 2010 12:23 am
Rock Solid Yield: What others are suggesting for Solid Yielding Stocks.
By Ron Rutherford, courtesy of Sabrient
In my last post, I opened the Rock Solid Yield category and briefly introduced you to Sabrient’s upcoming Platinum level subscriber product. To further define the overall strategy, I will compare and contrast our approach to some worthy suggestions by others.
Perhaps Motley Fool might have some thoughts on the what are the Best Dividend Stocks for Beginners? The question they pose to the round table of contributors and associates is:
I’m just starting, know little, have about $500, and want a solid stock with dividends as my first position. What should I look for?
All the writers provided good suggestions and ideas but the best was provided by Dan Caplinger. For a small first time investor with very limited funds, ETFs could provide diversification and thus lower risks. The Motley Fool, as well as the Rock Solid Yield (”RSY”) portfolio, look for “solid fundamental stocks” which pay dividends for years to come and increase in value over that time. But from the list of stock suggestions, it became obvious that they were not picking stocks strictly based on dividend yield percentages, as most are under 5%, with only BP yielding a generous 9%. Motley Fool’s advertising even promotes these ideas as 6 Secrets to Finding Dividend “Money Machines”.
6 Secrets of Dividend Investing:
How You Can Earn Great Returns with Less RiskFinding the best dividend stocks takes some legwork and careful analysis. However, here is how you can find the best long-term performers:
1. Avoid the Highest Dividend Stocks — You can’t pick stocks by dividend yield alone. Above-normal dividends are often a red flag of a company in distress. Studies have consistently shown that you will earn higher long-term returns by avoiding risky stocks with overly high dividends.
All six points made by the panelists are important considerations in making a Rock Solid Yield portfolio but “avoid” might not be the best describer of how to search out the best performing stocks. I believe a more productive approach is to be even more cautious and careful about higher paying dividend stocks. The higher the dividend yield, the greater the scrutiny should be. The risks associated with BP stock from the oil spill are well documented by the media. However,…
Did the NY Fed Leave a Funny Taste in YOUR Mouth Too?
by ilene - May 28th, 2010 3:29 pm
Did the NY Fed Leave a Funny Taste in YOUR Mouth Too?
Courtesy of Jr. Deputy Accountant
A "travesty" LOL.
Federal Reserve Bank directors say a Senate plan to kick bankers off the boards of regional Fed banks is an overreaction to one headline-grabbing incident and could harm the U.S. central bank.
Federal Reserve insiders worry that planned changes to the century-old U.S. central banking system — comprising 12 regional banks and a 7-member Washington-based Board of Governors — would make it more centralized, less independent, and less effective.
A provision in a wide-ranging regulatory reform bill near completion in Washington would ban bankers from serving on the boards of their regulators.
Alarm about possible conflict of interest at the Fed broke out after Goldman Sachs converted to a Fed-regulated bank to withstand the financial crisis.
This put then-New York Fed chairman Stephen Friedman — a Goldman director and former chairman — in violation of the Fed’s rules. Friedman requested a waiver for owning Goldman shares in 2008 and as he waited for the waiver, he bought more shares.
While his actions were not illegal, Friedman stepped down following public furor.
"This legislation, the way it’s proposed, is an overreaction to a particular unique situation, and to have bankers removed from these boards is a travesty," said Mark Hewitt, chief executive of Clear Lake Bank and Trust Co in Iowa and a director at the Federal Reserve Bank of Chicago.
The situation "maybe left a funny taste in someone’s mouth, but that’s not what’s happening in Chicago," he said.
So it isn’t a conflict of interest for Jamie Dimon to sit on the board of his bank’s regulator? Oh please, you’re totally overreacting, who else has their finger on the pulse of banking? Surely not the Fed themselves (as if that’s their job).
The Wheel
by Chart School - April 11th, 2010 2:34 pm
The Wheel
Courtesy of Allan
Below is my QQQQ chart, including the Daily Trend Model, an EW count, Auto-Trend Channels and the Elliott Oscillator.
Since the mid-February LONG signal, the index is up about 10%. Prices have been contained in a well defined trend channel, all the time safely above the Daily Trend Line (navy). On the bottom oscillator, the recent new highs in price are not being confirmed by new highs in the oscillator. This suggests that the proposed wave count on the screen is correct and that after the completion of the Wave 5 of 5, a significant decline will be likely.
Below is the same QQQQ chart, less all of the bells and whistles save one, the Daily Trend Model:
This chart suggests only one thing: that the market is in an uptrend and traders/investors should be LONG. The late January EXIT was good for about a 10% decline before the index flipped back to the bullish camp. There is no suggestion here about any imminent declines, non-confirmations, wave counts or trend channels. Just that one thing: LONG.
There may be a market environment coming where such simple, observable, understandable analysis will fail. Alternatively, this kind of market analysis will continue to be an effective steering current for navigating market direction. All I can say is that this analysis continues to amaze me with its effectiveness across so many indexes, ETF’s and stocks, as well as across multiple time frames.
I don’t claim to have re-invented the wheel here, only to have found one and am now employing it in all of my market decisions.
*****
Allan’s new newsletter, “Trend Following Trading Model,” incorporates his chart-based, trend-following method. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here. For a detailed introduction to the Trend Following Trading Model, read this introductory article.
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(