Archive for November, 2005

Wild Wednesday Wrap Up

Wow, that was a good one!

DOW down 81 but I don’t own any of them so I don’t care but they did ruin the party for all the other exchanges. On CNBC around 2pm I heard them say that the market had turned ugly when every index but the Dow was positive. Way too much weighting is placed on that index.

GM – led the way down with another 5% down day.

RIMM – dropped 6% on a bad ruling

LVS – Monday’s trade of the day finally paid off with a nice 2.5% drop! With the stock now down close to 10% since recommending, I would place a very tight stop on it – sell out if the stock crosses $42. It may get all the way to $39 before it bounces though..

BCRX was a huge winner today, finishing at $16.24. It was a gift to be able to get in at $14. I still think the stock may have $20 in its near future but my stop is set to $15.75.
Still waiting for Valero to tank so we can short the oils although XOM and COP can’t go positive on a great day.

With interest fears on the rise, we should finally get some downward movement on the home stocks.

GOOG – did a small reverse today, if you used tight stops you could have done very well!

CME has been punished to $360, this may be a preview of Google’s future.

HET – I don’t know if it is testing a floor or making a ceiling at $68.

GE – If anyone can explain a .40 drop in that stock today, please take over this column…

TXN – I’ll say I told you so until you buy it!

GME – will be a buy at $30, bad gaming outlook is a gift here.
Stay out of retail!

SIRI – Mel is on Mad Money tonight, we will have to watch this Trade of the Day closely tomorrow.

TIVO – nice rebound off $5.15 to $5.38 but I should have taken the $5.62 at 10:55 and put the money to work elsewhere – now I have to wait…

TWX – My buddy Carl Icahn stepped in to save my stock (I guess after reading my “Out with the Old” column this morning!).





Ignore that big giant number on CNBC!

The silly DOW (see 11/22 article) is holding back the market again.

JPM – down 1% on a normal sell-off
GM – Titanic continues to take on water
C – also profit taking
DD – “”
PFE – Another shipwreck
KO – normal pullback
PG – “”
BA – pulling back from 10% run
AXP – “”
AIG – “”
AA – “” 25% run
HD – “”
DIS – big problems there

The other 17 stocks of the index are up or flat. So we have a normal pullback on 10 stocks with just 3 real losers (PFE, GM and DIS). Yet millions of people stare at this figure like it is the be all and end all of market indicators! The Nasdaq is up 5, the Russel is up 4 and the S&P is down 2 so, on the whole, the market is holding strong to the major gains it has made.

I’m not jumping into new positions but I’m not ready to sell off too much either today. Even Ebay is kind of up…

============================

Rimm is halted and possible heading for a catastrophe when it opens (I hope so because I have a lot of puts). It seems that NTP will not be settling for $450M, an amount RIMM could have come up with. If your Blackberry suddenly stops working, short these guys fast!





Wednesday Thoughts

Well they underestimated the growth of the economy by 5% and inflation was a little lower too. Oops, sorry about that investors – turns out there was an extra $600Bn floating around that the government didn’t notice (or held back to goose the market at a critical juncture if you are one of those conspiracy people).

Carl Icahn is as sick as I am about TWX’s performance and is going to try to take it over in a proxy fight. This should be fun but I think I will sit this out for a while.

Oil inventories will matter a lot today. If there is any build in crude then $55/bbl is in the immediate future. That price will reverse as soon as it snows in NY though.

Microsoft kicked SYMC while they were down by reminding everyone they have security software. They will be giving it away for free for a while so the question for Symantec is “how low can you go.” Microsoft has a great scam going here – write software that is riddled with security leaks and then sell software to fix it. If this catches on plumbers may start installing pipes with holes in them or perhaps surgeons can leave out a few organs and charge you to go back in and fix it…

If the last 2 days worth of news doesn’t jump the market then we may be heading for a great fall.

Google may have oversold a bit yesterday but I am staying away from that one. It still trades at more than double Yahoo’s p/e and YHOO is off 10% in 3 days and heading lower.

SIRI update. There are conflicting rumors over whether CEO Mel will be on Mad Money tonight but it is certain that they just raised rates (this may be a reason for Mel to lay low today). Also, Howard Stern is doing some kind of March on 12/16 (option expiration day) that should generate major press. The FCC is making noise (nobody in the old media could possibly have pulled any favors here) about regulating Satellite and Cable – I guess the Republicans think they are just a few points from being the most unpopular administration in history so they may as well go for it! http://www.howard100channelguide.com/ says it all…





BCRX on the Move!

I went back to the well yesterday on BCRX because I saw a sudden upsurge around 3pm. I had no basis for buying it other than “something must be up” and my predisposition for liking the stock (it was the 11/16 Trade of the Day). Since it was below 12 again I jumped in but, cautious guy that I am, I only bought a little.

Too bad for me! The damn thing jumped up 16% in pre market with a new Roche partnership being “officially” announced at 1:30 am. This is why I always keep a few biotechs on my watch screen, you never know when one is going to pop. They can also burn the hell out of you.

In this case we have a good company in a good sector that hasn’t made more than 2M in their best year announcing a deal that will net them $25M “up front,” $5M over 2 years and “Future event payments could reach $530 million in addition to royalties on product sales of BCX-4208.” WOW!

Now I like this company for other reasons (as discussed on the 16th) but this is beyond major. The market cap of this company is just (as of yesterday) $312M and only 29% of the company is held by institutions.

If we assume that they make just $10M per year on the average and have no other successes, we still get a p/e all the way down to 30 in an industry where other companies fetch 100.

So this stock can easily go to $20, today! I will buy some more, if I can, at $15 but only after waiting for a pullback that looks like it’s reversing. A lot of day traders and rule traders will be dumping on a 20% up move and that may present a buying opportunity but I really don’t recommend this trade as it is very dangerous.

On the whole, I am just so glad I bought this at $11.75!





Out with the Old

I have been puzzling as to why my Time Warner stock is such a dog. They own all the marquis brands and are rolling out web services and even phone services to a captive market – you would think that’s a recipie for success….

But looking at the Video Ipod and watching more and more video on the web I have come to realize that the cable companies are just middle men, essentially delivery people for other people’s content and the web will soon enable the creative types to go directly to the consumers.

For example, the latest Star Trek was just cancelled because UPN could not recoup the $2M per episode average cost. This cost included all salaries, sets, expenses etc. The show had 8M viewers, not much in TV land but get each of those people to give you a quarter and everyone gets paid!

If Sienfeld could have gotten a dollar an episode from each of its 20M fans that watched it every week it would probably still be on the air – heck you’d have to drag them off! Maybe you could even get the Sopranos team to show up more often if they could cut out all the people who take a cut of what they earn…

So we have in the cable companies (and ultimately, in the networks) an antiquated system for delivering your entertainment. It may not go away tomorrow but it will be going away.

By about 2015 your TV will essentially be a computer and you will decide what you want to watch as easily as you decide what web site to visit. I don’t know who the winners will be, there is so much competing technology out there, but I do know the losers will be the cable and satellite providers and, ultimately, the networks. We will probably Google the top 20 shows and watch previews before purchasing.

Currently a channel like comedy central gets 50 cents per subscriber per month from the cable company. If you paid just 25 cents per episode of South Park, they would come out ahead. Also, they would not need to produce 50 other shows to fill the time, just the 10 shows people actually wanted to watch.

Sure there will be piracy and bandwidth issues and 100 other things to work out but with hundreds of billions of dollars at stake, you can…
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Phil’s World Wednesday, November 30, 2005

Since 11:30 Play has been rubbing up against its 30 tick average (above).

This kind of consolidating move can lead to a tremendous breakout so keep an eye out!

I have a rare no stop trade on my $22.50s even though I am already up 20% (another time you should probably do as I say, not as I do) because I am amazingly confident in this one.

This stock has a p/e of just 14, Apple is shipping new record #s of Ipods with Play’s workings, the company grew revenue 400% in ’04 and another 200% this year and Management just told the market that nobody’s getting this stock for less than $27 in a secondary and they raised guidance by 10%…

23% of the float is shorted and they will be squeezed out if we cross $26 for sure.

The 1:28 action is just what you want to see, a push against the ma prior to a move up…
1:35 – confirmed, looking oversold as it bounces off the ma, very bullish sign, unless the nasdaq tanks, say goodbye to 24!

This action looks much like last Tuesday when it gapped up from $20.30 to $21, drifted for a day then shot up to $22.50 the next day.





Tuesday Wrap-Up

Well, that was a torturous day.

I am feeling very bearish after watching stocks today. Even the mighty Google fell $20 (as I predicted 2 weeks ago and, more importantly, this morning).

My Ebays are officially killing me at this point with a $2 drop in the past week!

The builders are officially dead with great numbers on housing starts failing to raise them for more than an hour today.

One reason the market pulled back is the insane logic that, with great housing numbers and great consumer confidence, the Fed will raise rates again which will kill everything. The bottom line is that fear is driving stocks and that makes this a bad time to be long.

Valero was up all day and kept us out of oil but they did not go down much. Have to wait for inventory tomorrow…

The LVS put at $2.35 looks good thru tomorrow, on Yahoo their trailing p/e is listed at 170.

I picked up Tivo at the garage sale today. $5.15 was just too cheap to pass up.





Sirius Business – Trade of Wednesday Today

I just bought a bunch of SIRI Mar $6 calls for $1.60 solely because Mel Karmizan is on Mad Money Wednesday and I expect Cramer to hit all of his buy buttons on this one.

At 12:30 Forbes ran an article with SG Cowen raising SIRI outlook to $10, which I think is crazy (valuing the company at about $13Bn before they turn a profit) but I’ll take a 20% run if I can get it.

With the stock currently at $7.11 it is well off the $7.62 it pulled back from on the 17th so I think it’s quite reasonable to expect to at least challenge that again on Thursday.

The option should move penny for penny with the stock so a .50 move will return a healthy 30% but I will have my finger on the trigger as soon as it crosses $7.40 as no run up has gone unpunished with this stock.

We are just on the anniversary of the Stern announcement that doubled the stock last year but it hasn’t seen $9 since last December. I still like this stock for a buy and hold for 10 years play (see other articles) but it’s very dicey in the short term.





Tuesday Musings

I regret selling my OLED last week but up 100% is my limit once it pulls back. That being said I now feel like I chickened out way too early.

BUD looks very good here, still well below the 200 dma of $45. If it breaks that, it could hit $47 again.

INTC is another stock I should still own. It might go for a 52 week high of $29 before a real pullback.

SHLD is settling with 150,000 Kmart employees who lost $300M in retirement benefits for $12M, less than nothing ($100 each), and that’s coming out of insurance. Gotta love Eddie Lampbert! Stock is near low end of $110-$125 channel that has been safe to trade in for 3 months. No one is expecting much of them so upside surprise is very possible. (I own Jan ’07 $100 calls).

I am still hoping for more pullback on WMT but $50 may be a solid floor for them.

A sale is on on UPS, FDX and YELL but last December-Jan was a disaster for them so I’m staying away for now.

SNDK will test its 50 dma of $53.50 today, a failure could send it flying down again.

PLAY is doing the opposite going up past $25.

Even a dead cat bounce can bring MRK up .75 and give a nice return on the Dec. $30 calls @ .35 – the stock is still short-term poison though but I do like it for the very long term.

GME will be a screaming buy after it settles down. I got my wish, they lost money due to their merger with ELBO. The short story is this is better than expected but looks bad so sheep will sell making a fantastic buying opportunity.

This will the trade of the day as soon as it turns (that might be at the 11am conference call!). Q3 sales are up 30% but cost of sales are already down 5%. The game cycle really kicks off next quarter and anyone who doesn’t buy an xbox will buy a Playstation in the Summer, they have never had a summer blockbuster so this year may be incredible for GME.

SIRI may move up but I’m still waiting until the MP3 royalty issue is settled. Sirius just lost the “Radio Chick” show to Infinity, which may be a sign of talent wars to come.





LVS – Trade of the Day

LVS is facing increasing competition in its China Casinos and looks to lose more money this year than it did last year.

They just got a downgrade I agree with at JP Morgan and they should fly down to the 200 dma of $39. Catching them anywhere above $43 today should be a good deal as the stock will certainly see $42 at some point today.

At $44.65 a share with a forward p/e (best case scenario) of 37 and a market cap of $15Bn you have to compare them to established operators MGM (p/e 20, cap 11Bn), HET (p/e 17.5, cap $12Bn) and BYD (p/e 18, $4.4Bn).

WYNN with a p/e of 57 and a cap of $6Bn is another accident waiting to happen but today the catalyst is the downgrade on LVS.

The $45 put looks very attractive at $1.50 but I would avoid paying more than $1 premium.





 
 
 

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In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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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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