Archive for 2005

A Kodak Moment?

Barron’s had a very flattering article on Kodak’s saying the beaten down stock may double over the next 3 years (they have to rise 55% just to get back to where they were in January).

With 3 holds and 6 sells out of 10 analysts covering this stock and the stock trading at a 25 year low of $22, I think it is time to be the wolf amoung the sheep and take a piece of this one!

Sales were up last year and this year and the company will be doing a special investor event at the CES show in January so I think they are serious about addressing valuation issues.

The company has 95% institutional ownership, which has actually increased the last quarter and is heavilly shorted.

Forward p/e is around 12.5 giving the company, with $13Bn in sales and $1Bn in losses, a market cap of $6.3Bn. If we assume the losses are really from the restructuring, a return to the normal $500M in profits would be a huge boost to the stock. I’m liking the look of the restructuring because the company, although very late out of the gate, is the leader in Digital camera sales with a 22% market share.

I assume they have some kind of plan so I will be looking at them long before the CES show but I think the Barron’s article will trigger a sell-off as fast as it triggers some buying.

I am going to go for the January $20s for $2.55 (a .70 premium) and will be looking to get out as soon as I pick up 20%. No trade if it opens down or if it gaps up past $22.50. There will be heavy resistance at the 50 dma of $23 but above that it could have a great run.

Homecoming Queens

Thanksgiving signals the time for High School homecoming dances and I think it may also signal the time to get back together with the homebuilder sector.

Interest rates might not go up forever and the bad news seems to be more than priced into this group, which has the lowest p/e of any I follow.

Just like my Valero rule for buying oil stocks, I have a Toll Brothers/Lennar rule for homebuilders: If they are heading up, then it is safe to buy in.

Just a few I like:

MTH – p/e 8.7, 33% off high at year’s low.
LEN – p/e 8.1, 25% off high at year’s low.
SPF – p/e 6.2, 25% off high 15% above low.
DHI – p/e 8.8, recommended last week, I like it to $38
KBH – p/e 8.14, earnings on 12/15 – no warnings so far!!!
RYL – p/e 9, 15% off high, 25% above low – deservedly so.

They all have plenty of room to run if the industry comes back in favor. I think all the rats have left this ship and it’s light enough to float at this point.

Amazon Stock’s to the Moon

Rivers flow downhill and Amazon is in serious danger of breaking the damn when it turns back this time.

Having just come off a horrendous earnings and outlook just a month ago that sent the stock into a power dive from $47 to $39, the stock made an incredible recovery based on a lot of prescient betting that it would be added to the S&P. It may continue to have a little power for a week or so based on their new digital music service until someone notices that no one with an Ipod (80% of the market) cares.

So, now that the stock is back at $48, a 52 week high it might be time to take a closer look:

Earnings should be about $8Bn, up 13% from last year but earnings are barely going to crack $400M a 30% reduction from last year. Amazon is one of a legion of companies who have blamed the Hurricanes for their troubles but it looks deeper than that to me.

Red Flag #1: SG&A are out of control. Worse than that, rather than cut spending, Amazon reclassified 1/3 of SG&A to R&D. Not only did they not cut back on the problem but now those 2 categories are up 13% over the first quarter’s bloat. Somehow this item has gone from 7% of sales in 1996 to over 15% of sales today – not a recipe for success.

Red Flag #2: Cost of Revenue is creeping up, now almost 75% of sales.

So that’s 90% of sales gone and we haven’t even paid taxes.

Red Flag #3: $1.8Bn in debt. This is a stunning amount!

Red Flag #4: $1.3Bn in Accounts Payable. This one is very disturbing because it was only $1Bn in the 1st quarter when sales were higher! Receivables are only $280M, double what it was in ’03.

Hmm, that’s a lot of flags. I’m not even counting the fact that the company has a negative shareholder equity value and even negative net tangible assets since these are really just a summary of the other problems. For reference, Ebay has an Equity Value of $7Bn with Tangible Assets of $4Bn while Sears has EV of $4.5Bn and TA of $4.5Bn. Ebay is worth $62Bn while SHLD and Amazon both fetch $20Bn in market cap (but Sears has all that lovely real estate..)

Sears has kept their cost of revenue…
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Et Tu Buffet?

It seems that all the majors “value” companies are just swimming in cash and have, as a group, decided that the best companies to buy are… Themselves!

For quite some time Berkshire Hathaway has been a bargain at less than $85,000 a share for most of 2005 and, even though it has shot up 12.5% since September to $89,500, it still has a long way to run.

BRKA has a Market Cap of $139Bn but is sitting on an estimated $197Bn in assets. The company is bringing in eps of $5,190 per share (sounds crazy right?). 2005 earnings are expected to be right around $9Bn for a forward p/e of just over 15.

For perspective, in 1965 Warren Buffet took over Berkshire Hathaway when it was a textile company and had a market cap of $22M ($15 per share). Eddie Lampert take note!

In his 1999 Annual Letter to Shareholders, Buffet stated: Â?A repurchase of, say, 2% of a company’s shares at a 25% discount from per-share intrinsic value…We will not repurchase shares unless we believe Berkshire stock is selling well below intrinsic value, conservatively calculated…Recently, when the A shares fell below $45,000, we considered making repurchases.Â?

A conservative intrinsic value for the company this year would be about $118Bn, even with all the insurance payouts expected this year. That means that at a price below $89,000 Mr. Buffet can be expected to take some of the $41Bn in cash he has laying around and start buying back shares.

There are not all that many shares to buy, with a float of just 1.54M shares, Mr. Buffet has to buy slowly and carefully so as not to tilt the market…

Contrary to popular opinion, Berkshire did very well during the .com boom but, more importantly, outperforms the indexes by leaps and bounds during recessions and (here’s a biggie) just after Sept. 11, 2001 – it was one of the few stocks that went up, growing from $70K to $80K in 6 months.

If the economy starts going downhill, it will be time for Buffet to go shopping. He recently added Bill Gates to the board to ensure continuity for the next generation as well as to corral a potential competitor in global monopoly.

The bottom line is that if you give Mr. Buffet $85,000 of your money, he is going to earn $5,000 CASH (7%) on your investment in 12
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Who Says there are no Patterns

As a chaos theorist, this concept grates against me but as a behaviorist I can see how this works.

Essentially, they have developed a computer program that looks for small, obvious patterns in the market and they attack it for a quick in and out. On the whole, it’s pretty much what I do but no one has staked me with $100Bn yet!

These guys have been lighting up the markets with 14 years of 33% growth which makes it a nice place to park your money. On the other hand, if everyone starts doing this, we will be back to chaos in a week!

DELL(ETE) this from Your Virtual Portfolio?

For those of you who can handle long, detailed, number discussions, this is an excellent article on why, even at this price, Dell is no bargain.
I will say though, that if you apply this logic to almost any stock, there are very few that would stand up to the test.

There is a difference between buy and hold investing (which bores me to tears) and my hit & run style and you have decide what is best for you but, while I may agree that Dell is becoming a commodity and should not get a better p/e than BBY or even WMT for that matter, I also believe that at 27% less than it was in August people will buy it for Xmas!

Fundamentals shmundamentals I say! I’m looking at the January $27.50 for $2.90 (.65 premium) and sell it for $3.60 and go buy something nice (maybe a Dell) with the profits. Just remember, this is not a good stock so I’m setting a tight stop, around $2.50, and hope nobody notices this company is in trouble before I get out!

X Marks the Spot

Unless you live in some kind of media blackout zone you are probably aware that the XBox 360 is coming next week so, like many of you, I’ve been buying MSFT stock even as it keeps going up. Because it is still way too cheap!

Although the stock has been parabolic since breaking its 200 dma way back at $25 (On Halloween and congrats to CSFB for making that call on the 28th) I think it can go to $29.50 before a big correction. It may even just pause around there to consolidate for another jump, we’ll have to wait and see. The current p/e is 23.7, I think 25 will freak people out and cause a pullback, that’s about $1 away.

I think the Microsoft corporation under Balmer is firing on all cylinders and they have played the publicity/anticipation game perfectly with 3M consoles expected to be sold between now and Xmas eve. The gaming industry has had a notably slow quarter as everyone has been saving their cash for either this one or the Sony which won’t be out until Spring.

So Christmas belongs to Microsoft and all the companies that make games for them. Figure 5 games sold with each console so 15M games will be sold with the 3M units. The games cost about $30 each (I know, crazy!) so that’s $450M in game sales.

The trick will be to track the top selling games on Amazon and buy those companies into earnings – never try to guess what will be popular, it’s like picking next year’s fashions…

So Microsoft will sell 3M XBox 360s this quarter and people will buy their stock in some sort of frenzy over the $1.2Bn in revenue that will generate. While that may be a huge number – even for a company that has $40Bn in revenues, I think perhaps people are slightly overestimating the impact of that one item so expect a pullback when XBox fever abates.

Microsoft sold 10M old Xboxes last year, although the new unit is more expensive, I am pretty sure the company makes little or no money selling them, consoles are a loss leader to sell games. So we will be adding, for argument’s sake, 10% to sales without increasing profits – this is frowned upon by wall street.

On the plus side, we know Microsoft spent $4Bn developing the first XBox. Although they…
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Weekly Wrap Up

Boy it was tough to hang in earlier today.

I called the turnaround at 11 but the market didn’t really move until late afternoon.

ELN – stopped out early today with a nice profit.

FRK – I thought that thing was never going to move but the $46.63 went from $3.70 to $4.9, a 30% move in a day! You have to look to take it off the table if you give up .35

Notice Oil shot up when the European Central Bank announced a rate hike (which will weaken the Dollar).

EBAY – Now that’s a fire!

CY – Calls actually were gotten for .35, such a bargain!

GE – I bought bought bought and I’m gonna hold hold hold for now.

GM – This is an outrage! Don’t they read my column? I need to look into this.

GG – April $17.50s dropped .20, I hate to lose but I’m pretty sure it was option driven, we’ll see on Monday

IMAX – was up a touch but I decided to cast a wider net and bought TWX instead. They might be getting a very big check next week!

PD – cannot be held down, it’s over $130 again…. Those $125′s from Monday were a clean double

WMT – Jan ’07 $45 leaps went from $7.25 to $7.80 so far. Patience is key here.

AIG – moving up nicely

YELL – made a big move today, far more to go

JNJ – today was an ex dividend day, so stock went down the amount of payment

DHI – those crazy kids just might be right, there is still a housing market! (not for TOL though)

BCRX – Dec 10s made out 20% and stopped out

TXN – sale did end on Weds as predicted!

HET – still going up

MSFT – I got in 30% today on pullback (that might be as back as it gets)

MOT – Called that on the money, up 7% since call (option up 20%)

GME – still a good play

Google spread play review:

Buy the March ’06 $450 call for $17 // Now at $19.20
Sell the January ’06 $470 for $5 // Now at $5.60
Buy the March ’06 $360 put for $14 // Now at $14.50

Isn’t that amazing, we could close the whole thing now and be ahead $2.10 on $26 invested on Wednesday morning.…
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Google Confessional

Ok, I admit it – I’m a googaholic.

I just picked up 300 $400 puts that expire in 40 minutes for .20

I just can’t ignore the potential reward!

Crazy trade, see comments for play by play.

Bear Attack!

As near as I can tell, the bears were attempting to take advantage of the indexes reaching a lot of technical barriers in a fairly concerted attempt to drive the market down.

At this exact moment (11:34) I think they blew it but I am just amazed at the war that gets waged over the market!

If this rebound continues then the bears have done exactly the opposite of what they were trying – they have clarified that Dow 10,700, Nasdaq 2,200 and S&P 1,225 are now floors.

Expect a lot of “Bull is Back” sort of rhetoric this weekend if we finish up more than .5% on the indexes.


Zero Hedge

Auto Shares Surge As Fiat, Renault Confirm Merger Talks

Courtesy of ZeroHedge. View original post here.

With President Trump in Japan for a state visit and most of Europe headed to the polls to vote in the quinquennial EU Parliamentary elections, there was enough news to keep market watchers occupied during what was supposed to be a quiet holiday weekend in the US. 

But on top of these political headlines, on Saturday afternoon, the news broke that Italian-American carmaker Fiat Chrysler had approached France's Renault with a merger proposal that would leave the shareholders of each carmaker with half of the combined company, in a tie-up that would create the world's third-largest au...

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Phil's Favorites

Trump and the problem with pardons


Trump and the problem with pardons

Courtesy of Andrew Bell, Indiana University

As a veteran, I was astonished by the recent news that President Trump may be considering pardons for U.S. military members accused or convicted of war crimes. But as a scholar who studies the U.S. military and combat ethics, I understand even more clearly the harmful long-term impact such pardons can have on the military.

My researc...

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Insider Scoop

Jefferies Sees 60-Percent Upside In Aphria Shares, Says Buy The Dip

Courtesy of Benzinga.

After a red-hot start to 2019, Canadian cannabis producer Aphria Inc (NYSE: APHA) has run out of steam, tumbling more than 31 percent in the past three months.

Despite the recent weakness, one Wall Street analyst said Friday that the stock has 30-percent upside potential. 

The Analyst

Jefferies analyst ... more from Insider

Kimble Charting Solutions

DAX (Germany) About To Send A Bearish Message To The S&P 500?

Courtesy of Chris Kimble.

Is the DAX index from Germany about to send a bearish message to stocks in Europe and the States? Sure could!

This chart looks at the DAX over the past 9-years. It’s spent the majority of the past 8-years inside of rising channel (1), creating a series of higher lows and higher highs.

It looks to have created a “Double Top” as it was kissing the underside of the rising channel last year at (2).

After creating the potential double top, the DAX index has continued to create a series of lower highs, while experiencing a bearish divergence with the S...

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Chart School

Brexit Joke - Cant be serious all the time

Courtesy of Read the Ticker.

Alistair Williams comedian nails it, thank god for good humour! Prime Minister May the negotiator. Not!

Alistair Williams Comedian youtube

This is a classic! ha!

Fundamentals are important, and so is market timing, here at we believe a combination of Gann Angles, ...

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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control


Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...

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DNA as you've never seen it before, thanks to a new nanotechnology imaging method

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


DNA as you've never seen it before, thanks to a new nanotechnology imaging method

A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

Courtesy of David M. Gilbert, Florida State University


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More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...

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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism


The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...

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Swing trading portfolio - week of September 11th, 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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Free eBook - "My Top Strategies for 2017"



Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

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

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:


·       How 2017 Will Affect Oil, the US Dollar and the European Union


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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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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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