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.



#1 Performing Global Macro Hedge Fund Sees More Shorts Opportunities Ahead As China Bursts

By Jacob Wolinsky. Originally published at ValueWalk.

Crescat Global Macro Fund update to investors on 1/19/2019

Crescat Global Macro Fund and Crescat Long/Short fund delivered strong returns for both December and full year 2018 in a difficult market. Based on ...

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Zero Hedge

Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

Courtesy of ZeroHedge. View original post here.

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins an...

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Phil's Favorites

Divisive economics


Guest author David Brin — scientist, technology consultant, best-selling author and futurist — explores the records of Democrats and Republicans on the US economy in the following post. For David's latest posts, visit the CONTRARY BRIN blog. For his books and short stories, visit his web...

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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...

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Digital Currencies

Transparency and privacy: Empowering people through blockchain


Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...

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Insider Scoop Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...

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Members' Corner

Why Trump Can't Learn


Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...

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Opening Pandora's Box: Gene editing and its consequences

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


Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.


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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...

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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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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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