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Tuesday, August 9, 2022

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Fabulous Friday – Our AliBaba Play Pays off Big!

We're already up over 100% on Alibaba.

How, you may wonder?  Well, two ways:  Back in October of 2007, before Alibaba IPO'd in China, I was touting the company when it had an $8Bn valuation ($1.10 per  share – pre-split).  I was the first and only analyst in the US to point out the benefits of Yahoo's investment back then and our Members who play the Asian markets were able to take advantage of that and today should be the culmination of the white whale of investing – the 20-bagger as Alibaba is expected to IPO in the US at $160Bn just 7 years later

YHOO, on the other hand, took the long and winding road but it should finally be getting to our $50 target and that's another 100% gain on the stock – though a very small consolation to those who didn't pick up AliBaba directly.  Fortunately, at Philstockworld, we know how to BE THE HOUSE – Not the Gambler and, back in June, when the rumors of the AliBaba IPO began we came up with a way for our Members to make 400% playing YHOO into the AliBaba IPO.  

From our Live Member Chat Room:

YHOO/Albo – Why not just buy YHOO?  YHOO is $35Bn and owns 22% of AliB while SFTBY is $91Bn and owns 33% of AliB, so you get a lot more bang for your buck with YHOO, whose forward p/e is only 19, than SFTBY, whose forward p/e is about 17 – so not all that significant.  Of course, more significantly is the potential impact of (guessing) $50Bn worth of AliB on a $35Bn company!  

So we don't even have to go crazy if we want to play the "YHOO is undervalued" game.  The Jan $38/45 bull call spread is $1.60 on the $8 spread with 400% upside if YHOO gains 28%.  I think that's worth $800 for 5 shares in the $25KP (stop at $400) and $4,800 for 30 in the STP with a stop at $2,400.

That $4,800 bet in our Short-Term Portfolio is already well on the way to $21,000 if Yahoo can get over $45 and hold it to expirations, already the spread is $3.40 ($10,200), up over 100% in less than 3 months (and I will be up another 100% in 3 more months if you play it today and Yahoo hits our $45 target)!   This is how we play the IPO game at Philstockworld – the SMART way.

I have, of course, been pounding the table on Yahoo all quarter and it's in both of our short-term trading portfolios.  All indications is the demand for the IPO is very strong and we may see IPO hit $200Bn today – a very nice bonus for both YHOO and SFTBY.  

Meanwhile, congratulations to all who followed Wednesday's suggestion to buy the SCO Sept $30 calls at 0.25, those were a daily double, topping out at 0.55 yesterday but we weren't greedy an took 100% gains off the table at 0.50.

That trade idea came right from our Morning Post, as well as the previous afternoon in our Live Member Chat Room.  If you would like to get trade ideas like these live during the trading day as well as our Morning Market Outlook (what you are reading now) while it's in progress at 8:30 every day – you can join us here.  

We don't know what the next great investing opportunity will be (BTU, CLF, GTAT?), but we have a very sharp group of investors who share their trade ideas in our daily chat room and we have a wide range of tools at our disposal to take advantage of all sorts of market situations.  It's a very exciting way to spend our days – and profitable too!

Take BTU, for example, that is one UGLY chart and no less an authority than Goldman Sachs has told their clients to dump this coal company but one of our Members, Sibe, pointed out this morning that BTU has just issued an update that casts significant doubts on the bear premise.  

 "We believe there is a fundamental mismatch in early reporting regarding China's new coal quality policies relative to the emerging view of its likely beneficial effects on Australian high-quality coal exports," said Peabody Energy Chairman and Chief Executive Gregory H. Boyce.  "In addition, global announcements of metallurgical coal supply reductions continue to build, and we have seen a sharp increase in Indian thermal coal imports in recent months.  And in the United States, Peabody is encouraged by recent Southern Powder River Basin coal supply agreements that are being signed well above those of published indices, as customers end the summer with stockpiles at their lowest levels in nine years."

We were having extensive discussions on BTU yesterday because it's on our Buy List (sorry, Members Only) of stocks we want to add to our portfolios if they get cheap.  As BTU comes down to our $13 floor, we have several attractive ways to play it.  If, for example, you were looking to pay for a year of Premium Membership (still just $5,000 until the end of the month), you could sell 15 of the 2016 $13 puts for $2 ($3,000 credit) and buy 10 of the $10/15 bull call spreads at $2.45 ($2,450) for a net $550 credit.  

The worst case on that spread is BTU is below $13 and you end up owning 1,500 shares at net $12.64 ($18,960) while, if BTU makes it to $15 (now $13.49) into Jan 2016, you collect $5,000 in addition to the $550 credit you already pocketed.  Since BTU pays a 2.2% dividend, that's a trade we'd like to add to our Income Portfolio.  

Rather than letting Jim Cramer and his Bankster buddies scare us out of perfectly good companies – we prefer to wait patiently for the the sheeple who follow them to stampede out of stocks and then we are able to go bargain hunting!  

GTAT ($11.60) is another example of a company that people are being chased out of for all the wrong reasons but, unfortunately, those plays are reserved exclusively for our Members – these are just the free samples folks, don't get greedy!  

Have a great weekend,

– Phil

 

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Phil

Kansas republicans going against their governor and tax cuts. We can hope the extreme  swings are starting to reverse. Anti-Anti-Tax-Cuts!

Phil – I am not sure why you keep ZH links on your site. I was reading one of their articles this morning and the comments of their readers are truly appalling – I don't mind a joke here and there and everybdoy is entitled to their opinion but this really goes too far:

http://www.philstockworld.com/2014/09/21/the-inconvenient-truths-of-dictators/

A mix of racism of the worst kind, some anti-semitism mixed in there. I would not want to be associated with that crowd! I believe you kicked out some members for the exact same comments. It's not the first time I have seen it either. And in some ways, their articles often call for that kind of comments. Just my $0.02!

ZH / Phil – I am not sure it's a financial web site anymore! It's like calling Fox News a news channel! Their readers are truly horrible and they fan that hatred with their articles… I have pretty much given up on reading their stuff because of that even though they sometimes have interesting stuff. But who can sponsor the bile that they generate…

Phil / Futures /NKD

Some long questions for the weekend or after hours…

I managed to extricate myself from my /NKD position with some pain and I would really like you to expand on your own /NKD position, especially for overnight positions.

First some math… You stated “/NKD is now at 16,165 and the high was 16,185 and it's $5 per point, per contract so I'm good to short 1 here and 1 at 16,175 to average 2 at 16,170 and then 2 more at 16,190 to average 4 at 16,180 and then 4 more at 16,200 for 8 at average 16,190 with a stop at 16,210 for a $160 loss.” Wouldn’t that be an $800 loss? ((16190-16210)*$5*8contracts)=-$800

Then: We have conviction and we are going to let it overnight, but overnight it shot up to 16330 and, since we don’t use hard stops, we are at 16190 average and with a loss of $5,600 on 8 contracts. Since it retraced to 16260 by opening time we are down only $2,800. You are already at 8 contracts, do you double down to 16? You get your average to 16225 and with a retrace you can get back to one or two contracts (as it has), but if it hadn’t? Had it gone back up to 16300 or more?

Yesterday you made a comment: “Those I felt confident with when I walked out the door but they did hit a nice, low stop I set and 1/3 are gone (7/20).” So you did place a hard stop or was that a mental stop that you manually triggered during the night? When you leave futures during the night, do you check on them at regular intervals or do you place hard stops?

It would be really helpful if you could detail your position as much as possible: Opening position, doubling downs, partial exists, what ifs, monitoring hours, hard stops, mental stops, etc. Since live seminars are time constrained and you have to enter and exit positions at unfavorable times a few REAL trading sessions like this would be REALLY helpful. I think a couple of successful sessions would be great, but I think bad, unsuccessful and disastrous sessions would be even better since I make it a point to learn as much as possible of mistakes/bad situations. We all know your success stories, but I would really like to hear your REAL horror stories and the lessons you learnt from them. Of course you’re time constrained, but a couple a week after hours would be great.

Thanks

Phil ZZ

I still think the masses are close to saying FU. On top of that the .1% up don't get who buys their meal ticket!

I could go on but everyone wants others opinions, links, and I thing most of them a full of shit!

are

Any ideas to how low /SI might go? Sitting on some big losses and trying to decide whether to bail or wait it out…Contract has 70+ days til expiration but it seems there is no floor to this metal in the current environment….thanks for any and all comments

Phil

I tend to agree with stjean respectfully that you need to read the news before you post it.

agree on /SI and leaving open overnight….I have been burned twice in 2 weeks with silver dropping anywhere from .40 to .60 cents in a matter of an hour or so during the middle of the night(west coast time)

its definitely an expensive lesson but worthwhile nonetheless….the idea was to hold it anyways( 3 contracts) til expiration and play for a bounce but watching thousands of dollars vanish in minutes was crazy….I'd rather get back in on the way up after some sort of floor that lasts more than a few days is set….Futures are fun but quite stressful at times!!!

Phil- I was reading your comments about gold and using it as a hedge against inflation and it brought up some ideas I had been thinking about for a while. While I realize this is a very simplistic view and theory, I'd like to know your thoughts. As you have been saying for a while, 99% of the people are not taking part in the wealth creation of the stock market to the extent of the 1% and corporate America (using buybacks instead of expansion). So, for the most part these 99% have lost earning power and are struggling just to pay the basic bills (mostly debt service on student and consumer loans) and survive. Therefore no one can raise prices without a significant drop in demand because the consumer is too stretched at current pricing levels already to afford to pay a drop more for goods and services. So, inflation is kept at bay by the natural forces of supply and demand and availability of purchasing power for the masses. So in this simplistic view, there is no need to worry about inflation until there is some incentive to create jobs that pay well and expand the workforce with more than minimum wage/no benefit jobs at Walmart and similar companies with similar employment policies. Until we see this starting to happen it would seem that we don't need inflation hedges. Real estate will stay depressed, even with record low financing rates , until then as well because the majority of the potential buyers can't afford to buy and won't be able to until something changes drastically, or so it seems to me. While history tells us it won't stay this way forever, it sure seems we are locked into this pattern for a while unless there is a significant change in the political landscape at least to pump money into the hands of workers rather than those needy 1% the GOP keeps giving to. 

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