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Monday Market Movement – Back to the Top

It's quiet time.

With a Fed Meeting a week from Wednesday, the Fed has entered a "quiet period" where there won't be any policy statements.  At the moment, based on last week's comments, odds are strongly favoring a 0.25% rate cut – even though the market is at record highs, unemployment is at record lows and inflation is at or over the Fed's 2% target so a rate cut, if we get one, will undercut faith in the Federal Reserve as being independent of the Government and will render them far less effective for years to come – but at least Trump will get his bonus rally.

As you can see from the S&P chart, as we expected, breaking out over the Strong Bounce line is taking us back towards the highs and last time we did this (June) on hopes of a China deal and a rate cut, we ran up another 2.5% over 2,950 to 3,020 so 3,100 would be the ideal goal of this run on the S&P (/ES) – at which point we'd probably start shorting again – deal or no deal with China.

Still, there's probably a month of this nonsense to deal with – 30 days in which the bulls will once again become insufferable with their ever-rising predictions for higher and higher market prices.  It's a very annoying time to be a Fundamentalist and, come to think of it – we don't enjoy the crashes either – maybe I should stop thinking and become a TA guy…

Not a very exciting week on the Economic Calendar and earnings are barely trickling in at this point but still a few big guns reporting – even at this leat stage:

Image

GameStop (GME) is very interesting as yes, they are going through a rough patch but not as rough as is not indicated by their $4.30 price as they made $7.5M last quarter and $4.30 is just $413M for the whole company so, even if they only made $30M for the year – that's still pretty reasonable but Q4 is their big one and they had an operating income of $196,300 from 11/2-2/2 which was wiped out by restructuring.  I'm betting they won't do that again and should make about $1 per $4 share – that makes them a great bargain ahead of earnings.  

We're not going to go too crazy as they are still going to show declining revenues to last year but they eliminated a $157M quarterly dividend so, guess what?  That's $600M a year that can now drop to the bottom line.  So bad if you were in them for the dividend but good if you can buy the whole company for $413M so let's do that with this spread:

  • Sell 1,000,000 GME 2021 $4 puts for $1.50 ($150,000,000) 
  • Buy 1,000,000 GME 2021 $3 calls for $2.20 ($220,000,000)
  • Sell 1,000,000 GME 2021 $5 calls for $1.60 ($160,000,000) 

That's a net $90,000,000 credit on the $200,000,000 spread and the margin requirement is $137,950,060 in an ordinary margin account so it's a pretty efficient way to make $290,000,000 if GME is over $5 on Jan 15th, 2021.  Of course, I'm not serious about the amount but, if I had $4Bn and owning GME for net $310M (you're worst case – not that you could actually sell put options on every single share, of course) constituted just 1% of my net worth, then yes, I'd certainly play for the whole company – especially if I owned a sports team and a stadium and wanted to leverage my way into the ESports business. 

In fact, Steve Ballmer would be the perfect purchaser for GME as he owns the LA Clippers AND knows a lot about the gaming biz through Microsoft, who developed the XBox under his administration.  Microsoft is also very big on virtual reality with their Holo Lens and new VIVE systems and GameStop has 5,800 stores in 14 countries so they make a logical partner for one of the big manufacturers and all the new technology will give them plenty of things to sell through the transition from PC games to VR games where the company will likely become more of a showcase than a sales floor. 

Meanwhile, while we wait for Steve Ballmer to call us, we can do the same spread with 20 short puts ($3,000) and 50 of the spreads ($3,000) and that's net $0 on the $10,000 spread and we'll see how that goes to start.  Our worst case is owning 2,000 shares of GME for net $4 ($8,000) and our margin requirement is $2,777 so still an efficient way to make $3,000 in 16 months.  

Meanwhile, we will see what is actually announced at Texas and other US States are expected to officially announce an investigation into Google and possibly other major Internet players, almost certainly FaceBook too.  According to the WSJ:

Google's parent company, Alphabet, has a market value of more than $820 billion and controls so many aspects of the internet that it's hard to imagine surfing the web for long without running into at least one of its services. Experts believe the antitrust probe could focus on at least one of three aspects of Google's business that have caught regulators' eyes.

An obvious first place to look could be online advertising. Google will control 31.1% of global digital ad dollars in 2019, according to eMarketer estimates, crushing a distant second place Facebook. And many smaller advertisers have argued that Google has such a stranglehold on the market that it becomes a system of whatever Google says, goes — because the alternative could be not reaching customers.

Last week, online project management company Basecamp complained that Google's paid search ads are similar to a "shakedown," noting that it had to pay to make sure its service appeared before rivals' ads.

"There's definitely concern on the part of the advertisers themselves that Google wields way too much power in setting rates and favoring their own services over others," said Jen King, the director of privacy at Stanford's Center for Internet and Society.

What an interesting way to start the week! 

 


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  1. Everything is awesome again!


  2. I know I repeat myself, but has there been a more corrupt, incompetent and criminal administration in the past? These guys raise the bar every week it seems.


  3. I find it hard to believe that Japan doesn't spend more on interest:

    Maybe negative rates?


  4. The cost of not doing anything about climate change outweigh the cost of fighting it:

    https://www.thenation.com/article/climate-change-costs-inaction-green-new-deal/

    A new working paper from the National Bureau of Economic Research estimated that if we continue to emit greenhouse gases at our current pace, it would reduce global economic output by 7.2 percent by the end of the century. If we were to meet the goals set forth in the Paris Accord, output would drop by only 1.1 percent. The difference between those two figures, in 2018 dollars, would be over $5 trillion per year. [...]

    On the other side of the ledger, there is a big potential payoff for saving our environment. A 2016 report by the Global Commission on the Climate and Economy estimated that $90 trillion will have to be spent on infrastructure worldwide through 2030, and while transitioning to a carbon-neutral economy would require more up-front capital, the total wouldn’t be significantly more over that time span. The researchers estimated that those investments “could deliver a direct economic gain of US$26 trillion through to 2030 compared to business-as-usual.”


  5. Phil, 

    Made some muffin money going long on /NGZ19. Would like to hear your thoughts on /NGJ20 and what levels you consider targeting? Thank you as always….






  6. Crimes Were Committed






  7. Looking to hire 30,000, Amazon plans nationwide job fairs


  8. T -Stock +7% after activist Elliot Mgmt disclosed a $3.2 bln stake.

    Will likely cover some on this move.


  9. Good Morning!


  10. GME  That is a mighty big position Phil :)


  11. GME – Unfortunately the calls opened higher than your spread idea.  The $3 and $5 calls opened with 50 lot purchases.  Was that your hedge fund ?


  12. From Briefing :

     FNMA/FMCC — Big rip higher in the GSEs following a Compass Point upgrade on favorable ruling announced Friday on legality of govt sweep of GSE profits.

    Compass Point went to Buy from Hold on both names.

    Firm has a $7.75 tgt on FNMA (3.49 +0.78) and $7 tgt on FMCC (3.12 +0.55). 



  13. Volkswagen bets big on electric. Will consumers buy in?


  14. Big Ag wants a cut of booming fake-meat market





  15. Good morning!

    I'm here today but not tomorrow as I'll be with Hemp Boca pitching Kevin Harrington on a multi-million Dollar deal.  Aside from that, we expect to get our first major order this month so fingers crossed as this could be a huge week or two for PSW Investments!  

    Big Chart – Still need the RUT to confirm the rally but not going to pick nits here as the other indexes are very strong.  We should just watch for trouble at 1,515 especially and 1,528 after that.

    Corruption/StJ – What amazes me is the lack of outrage.  How do we accept this?  I guess it's because people don't understand how Government works (lack of education helps there) and how this BS directly affects us as taxpayers.  What's sad is the way that Billions have to be wasted in order for them to skim just Millions – would be a lot cheaper for us if we just paid him in cash.

    That's my solution – After we elect someone, if they want to scam us they have the option of unveiling their evil scheme to, let's say, build a $55Bn wall so they can pocket $500M in graft and then they country can have a 2nd election to decide if we want to just pay them $500M to go away and leave us alone.  That way, the scam can just be about playing the voters for idiots and obtaining the office in order to get a big payday but they won't actually have to destroy the country to get the money….

    Image result for trump scam criminal

    Trump Tax Fraud Timeline

    This is a good book on the subject:

    Japan/StJ – $17Tn of negative-yield bonds helps a lot (I'd say Japan has $5Tn of the World total).  

    So, logically, if they are selling negative bonds, the more they sell, the more they make so there's no limit to what they can borrow.  The trap is, of course, that if the rates ever do tick up – the country can be completely wiped out by a 3% rate cycle.

    I think the math on saving the planet is obvious but it represents a shift of $90Tn away from fossil fuels and entrenched disaster mitigation firms to the renewable sector – who don't have the political clout to out-lobby the old guard – even when the facts and logic are on their side.  

    /NG/Jasu – Very nice!  As you know we cashed out of our 2020 /NG plays as we thought we were lucky to hit $2.25 but, of course, we still have our UNG and CHK plays to take advantage of, well, this.  

    I think going in now on /NGJ20 is a bit too risky but UNG is still a good play or CHK for the longer term.

    Even LNG is interesting down here. 

    /NG/Options – I really don't like the direction global NG prices are going.   We got back to the monhly high so I wanted to take the money and run on the Futures.  Longer-term, I still think global prices end up being more like $3.50 than $2

    In the OOP we have this UNG position:

    UNG Short Put 2020 17-JAN 23.00 PUT [UNG @ $19.54 $0.48] -5 4/18/2019 (142) $-1,150 $2.30 $2.20 $-1.10     $4.50 - $-1,100 -95.7% $-2,250
    UNG Long Call 2021 15-JAN 19.00 CALL [UNG @ $19.54 $0.48] 20 7/17/2019 (506) $7,700 $3.85 $0.05     $3.90 $0.23 $100 1.3% $7,800
    UNG Short Call 2021 15-JAN 25.00 CALL [UNG @ $19.54 $0.48] -10 7/19/2019 (506) $-2,000 $2.00 $0.10     $2.10 - $-100 -5.0% $-2,100

    We just bought back short Jan calls for a $1.35 gain ($1,350) and UNG is at $19.54 with /NG at $2.25 and we expect $3, which is 30% higher so $25 is still the target and the position is about even overall and we're not too aggressive on the short puts (which we'll roll) so I don't see any urgency to kill this one though, as I said, I'll pull the plug on everything if the LTP can't hold $1,200,000 – now $1,284,936.

    We're back in the green already and hopefully we hit goal at $25 for $12,000 (now net $6,640) and only 1/2 covered so lots of upside if it goes higher.   We also have UNG in the Money Talk Portfolio and that one we can't touch – so I've always had confidence in it.  

    Speaking of Money Talk – they want me on next Weds for the Fed, that afternoon to talk about it.

    T/Albo – So silly to break them up after they just made an integration move but the market likes it. 

    Glad we chopped CDE at the highs:

    You have to know when a stock you like is too expensive – as well as too cheap!  

    Barrick pulled back to but that's why we killed CDE – so we could concentrate on improving GOLD. 

    WPM crazy high too:

    August 16th, 2019 at 2:30 pm | (Unlocked) | Permalink |

    • GOLD - We had a stop on 20 of the 40 remaining Jan $10s but way over it now and I think we should just cash all 40 out at $8.50.  

    Image result for you've got to know when to fold them

    GME/Willsons – Just practicing for my next venture fund.  cheeky  Look what I did to the stock:

    That's what I hated in the old days – you couldn't talk about the deals you predicted as everything was under NDA – even ideas to buy things.  It's much more fun predicting things in public (though not as profitable).  

    Fund/Albo – There's a real Chinese Wall between me and the Fund – Doug reads my ideas just like anyone else and decides whether my idea fits the fund.  We usually do a weekly review where I give my input but I don't make trading decisions – that way I can share my ideas equally and fairly with our Members.  

    GME 2021 $4 puts still $1.40 so not too bad and the $3 ($2.65)/5 ($1.95) bull call spread has climbed to 0.70 but also not too terrible as 20 short puts for $2,800 and 50 long spreads at $3,500 is net $700 on the $10,000 spread at the moment but you could sell the $5 puts for $2 and then it's a $500 credit and $10,500 potential pay-off for a spread that's only 0.20 from our goal already

    That's what we'll do for the OOP.  


  16. Last week's trade ideas all gaining traction.  That's what we expected – value plays will gain traction if we're having another leg up.  Fortunately, our portfolios are packed with them.

    If this carries through on our other value positions (essentially all of our positions) – we're going to see some massive gains in our portfolios between now and the Fed. 


  17. Remember – the idea of our 5 plays to make $25,000 in 5 months was to see if we could outperform the OOP into the end of the year (on the assumption we cashed it in and just played those to avoid missing out on a rally).  

    So far, no good as the OOP is $359,450 this morning – up $29,000(ish) since our 8/13 review.

    CNBC reporting there's a lobster scam where our lobsters are being shipped to Canada and repackaged for China to avoid tariffs.  How ridiculous! 


  18. Phil,

    I would appreciate your thoughts on the following strategy as a short-term vehicle with known risk in this 'Through The looking Glass' environment with mixed fundamentals, high valuations and a recurring floor in the low 2825ish area:

    Buy in-the-money $5 bcs maturing before the next earnings report using the last reaction low (8/5/19) as the short leg, e.g., WMT which dropped to 105 on 8/5 and reports 11/14, the OCT 100/105 bcs would yield a 6% profit, whereas AMZN which hit 1748 on 8/5 (reports 10/23) would produce a 32% gain on a 1740/1745 OCT spread (XLV=19%, LMT=11%, ROST = 67% all based on Friday's prices).

    Thanks, as always


  19. When Human spirit shines…and a wonderful use of the language

    https://youtu.be/5z4k8tE8D0I


  20. what do u think is up with tf phil


  21. Spreads/8800 – We had a guy who played those all the time and he kept telling us what a genius he was until they went against him and he went broke.  I don't mind AMZN for 32% though you have less than 10% to kill you there but playing for 6% means after 16 times (4 years) you finally match your risk and I doubt you can find any 4-year period in which you never get burned on that strategy and getting burned twice in a row means it would take you 8 more years of betting just to get even.  

    AMZN was at$1,800 on April 1st and $1,950 at the end of April and $1,700 on June 1st and $1,925 at the end of the month and $2,020 in early July and back to $1,760 in early Aug so what period of time do you bet it won't move 10% and blow you out of the water?

    It's especially dangerous if your margin power will force you to shut the position down at the worst possible time (when it's spiking against you) – then you will lock in your losses along the way while you have to wait out your gains until the last day.  

    Bercow/Advill – You could tell last week that he was completely fed up.  He's very well-liked.

    Woops, what happened to the Nasdaq?

    TF/Tommy – You mean the Russell?  That's /RTY now.  Had a nice catch-up pop this morning but already back to 1,517 so I wouldn't take it seriously.  And it's Monday.  These volume levels make everything pointless:

    Date Open High Low Close* Adj Close** Volume
    Sep 09, 2019 299.14 299.24 297.67 297.69 297.69 21,943,376
    Sep 06, 2019 298.17 298.76 297.42 298.05 298.05 49,522,600
    Sep 05, 2019 296.79 298.83 294.00 297.82 297.82 83,258,100
    Sep 04, 2019 293.14 294.06 292.31 294.04 294.04 46,887,300
    Sep 03, 2019 290.57 291.58 289.27 290.74 290.74 69,101,400
    Aug 30, 2019 294.22 294.24 291.42 292.45 292.45 62,901,200
    Aug 29, 2019 291.72 293.16 290.61 292.58 292.58 57,899,400
    Aug 28, 2019 286.14 289.07 285.25 288.89 288.89 59,696,700
    Aug 27, 2019 289.54 289.95 286.03 286.87 286.87 66,668,900
    Aug 26, 2019 287.27 288.00 285.58 288.00 288.00 72,423,800
    Aug 23, 2019 290.92 292.76 283.47 284.85 284.85 149,161,500
    Aug 22, 2019 293.23 293.93 290.40 292.36 292.36 51,666,400

    Notice the only real gains we are getting come in the Futures.  There's only been one day in two weeks when the S&P gained more than 10 points during an actual session yet it's up 130 points from the lows.  


  22. Boy I miss John Oliver when he's on vacation:

    Pretty much we went off a cliff as Europe closed (11:30)

    Dollar bravely trying to prop us up.

    130 is where we used to short it.


  23. Phil,

    Thanks for the ITM BCS guidance 


  24. Have added small positions in a couple of beaten down, speculative, Midstream MLPs -  MMLP and SMLP.  Both are yielding over 20% despite both having recently slashed their dividends.  Certainly not for everyone, and they both come with K-1s for tax purposes.

    Both appear to have their reduced dividends adequately covered.  In fact SMLP has indicated that they now project 1.75 to 1.95 distribution coverage for 2019.





  25. HOV still flying – too bad we don't still have 10,000 shares (pre- 1/25 split):

    Apparently, people can become addicted to Fox News.  

    • FuelCell Energy (FCEL +38.9%) surges to its highest since July after posting a far smaller than expected Q3 loss as revenues nearly doubled to $22.7M, driven by the Exxon license agreement and an increase in Generation revenues related to the Bridgeport Fuel Cell project.
    • FCEL says Q3 adjusted EBITDA climbed to $3.2M from an adjusted EBITDA loss of $11.3M in the year-ago quarter.
    • Q3 operating fell 27% Y/Y to $9M, which FCEL attributes to its restructuring initiatives and resources allocated to funded Advanced Technologies projects.
    • Backlog and project awards totaled $2.1B at the end of the quarter, vs. $1.9B at the end of the year-ago quarter.
    • Boeing (BA -1.4%) is lower after suspending load testing of its new 777X aircraft, the latest blow for the company whose 737 MAX faces delays that threaten to prevent it from resuming North American flights during the December holiday season.
    • But Morgan Stanley keeps the faith, saying Boeing has become its top pick in the aerospace and defense industry, and believes the 737 MAX grounding "creates a buying opportunity in a steady aerospace cycle," setting a $500 stock price target.
    • Although some investors fear the fallout from the 737 MAX crashes will weigh on orders over the long term, Morgan Stanley believes Boeing still has "considerable" growth potential.
    • Stanley's upbeat view comes amid signs that, at least among short-term traders, sentiment remains bearish; Schaeffer’s Investment Research says options activity suggests traders are leaning more toward puts, bets that pay out if Boeing's share price declines.
    • Boeing (NYSE:BA) has suspended load testing of its new widebody 777X aircraft, a final certification needed under the FAA's approval program.
    • While reports suggested a cargo door exploded outward during a high-pressure stress test on the ground, a Boeing spokesman said, "overall testing is continuing."
    • The company previously reported a delay on its 777X program due to engine problems that pushed the first flight into 2020.

    • Medicine Man Technologies (OTCQB:MDCL +11.9%entered into a binding term sheet to acquire four additional dispensaries in Colorado from a leading cannabis retailer.
    • Under the terms of the transaction, Medicine Man Technologies will purchase the group of four dispensaries for ~$50.09M, consisting of ~$25.05M in cash, the issuance of 4,202,720 shares of its common stock at a price of $2.98 per share, and a deferred cash payment of ~$12.52M to be made 12 months following the initial closing date.
    • The four dispensaries to be acquired are located in Denver, Aurora, Pueblo West, and Mountain View, with the fifth location currently under construction.
    • China has added nearly 100 tons of gold to its reserves since it resumed buying in December, as government purchases accumulate bullion to help diversify their reserves amid a rally in prices and the drag of the trade war with the U.S.
    • The People's Bank of China raised bullion holdings to 62.45M oz. in August from 62.26M oz. in July; in tonnage terms, August's inflow totaled 5.91 mt, following the addition of ~94 mt in the previous eight months.
    • Trade war restrictions – or sanctions, with Russia – give "an incentive for these central banks to diversify," says National Australia Bank JohnSharma. "Also, with increasing political and economic uncertainty prevailing, gold provides an ideal hedge, and will therefore be sought after by central banks globally."
    • China's iron ore imports rose last month to the highest level since January 2018, jumping 4.2% from July and 6.2% from a year earlier to 94.85M metric tons, Argus reports.
    • Imports fell to a record low in June on tight supply from Australia and Brazil, but supply concerns have eased considerably, with steel demand reasserting itself as a key determinant of China's iron ore prices.
    • Iron ore shipments from Australia's Port Hedland rebounded by 10.5% to 45.43M mt in August, and weekly iron ore shipments from Brazil hit the highest level since January 2018 in the week ended Aug. 12.
    • Increasing iron ore imports and expectations of more supply will limit the upside for iron ore prices in the near term, even though demand may rise during the September-October peak steel sales season in China, according to the report.
    • An appeals court late Friday reversed an earlier ruling which had backed the government's taking all of Fannie Mae's (OTCQB:FNMA +22.9%) and Freddie Mac's (OTCQB:FMCC +21.4%) profits.
    • "The result adds a sense of urgency to recognize that the GSEs have repaid the government, move toward a recapitalization plan to formalize operational restrictions, and increases the likelihood of the GSEs receiving compensation for their overpayment of the original terms of the PSPA," writes Compass Point, upgrading the stocks to Buy from Neutral.
    • Speaking this morning, Treasury Secretary Mnuchin says he expects to soon have an agreement allowing Frannie to begin retaining earnings.
    • L Brands (LB +2.7%) hosts an investor update call tomorrow to provide an update on strategy for the company and its brands.
    • CEO Les Wexner will make comments as well as CFO Stuart Burgdoerfer and the top execs with Pink, Bath & Body Works, Victoria's Secret Beauty and Victoria's Secret Lingerie.
    • Wexner and gang look to rally investors with LB shares down 33% YTD.
    • Raytheon (RTN +0.7%) and United Technologies (UTX +0.8%) have been named "Bullish Fresh Picks" by Robert W. Baird.
    • Investors should be aggressively buying the stocks at current levels to take advantage of their discount to peers, according to analyst Peter Arment, who said both stocks could rise 30%-40% from current prices.
    • Source: Bloomberg First Word
    • Axon (NASDAQ:AAXN) has achieved wireless carrier certification from Verizon and AT&T for its Body 3 body-worn camera.
    • The device is the first LTE-connected camera built for law enforcement and is on track to begin shipping end of September, 2019.
    • A former Boeing (BA +0.7%) official who played a key role in the development of the 737 MAX has refused to provide documents sought by federal prosecutors investigating two fatal crashes of the jetliner, the Seattle Times reports.
    • Mark Forkner, Boeing's chief technical pilot on the MAX project, cited his Fifth Amendment right against self-incrimination in response to a grand jury subpoena issued by DOJ prosecutors looking into the design and certification of the plane.
    • During the certification process, Forkner suggested to the FAA that MCAS not be included in the pilot manual and was said to be frequently anxious about the deadlines and pressures faced in the MAX program.
    • The FAA, after internal deliberations, agreed to keep MCAS out of the manual, reasoning that MCAS was software that operates in the background as part of the flight-control system.
    • Impossible Foods (IMPSBL) is looking to China as a top market to sell its products overseas markets.
    • The firm, which has already launched products in Hong Kong and Macau, is planning on selling on the Chinese mainland. Parts of the Mainland face a protein shortage due to the African Swine Flu epidemic, as well as some local land and water shortages.
    • "China is our highest priority for future expansion, full stop," CEO Pat O’Brown tells Reuters.
    • Economic costs? The number of tourists visiting Hong Kong tumbled 40% Y/Y in August as protests gripped the city.
    • That marked a sharp deepening of the 5% year-on-year decline in July, Hong Kong Financial Secretary Paul Chan wrote in a blog post.
    • Last year, Hong Kong was one of the world's most visited cities, with 30M tourists.
    • Planning to launch its IPO roadshow today, WeWork's parent is eyeing another valuation cut as some existing investors push the workspace company to shelve its upcoming offering, Dow Jones reports.
    • A valuation below the $20B level would be an even steeper drop from the $47B mark where We Co. (WE) last raised private capital this year.
    • Should We yank or postpone the IPO, it stands to miss out on nearly $10B (from the offering and debt that is contingent on the IPO), and would either need to find more cash or scale back its plans for further growth.
    • Disney (NYSE:DIS) inks a deal to rent most of Pinewood Studios in Buckinghamshire as the battle with Netflix (NASDAQ:NFLX) over production talent in the U.K. ramps up.
    • The company landed a 10-year lease for the studio space it used in the past for films Mary Poppins Returns, Star Wars: The Last Jedi, and Guardians of the Galaxy, according to The Sunday Times.
    • Netflix announced plans in July to create a production hub at Pinewood's Shepperton studios for original shows.

  26. I'm thinking BKNG will make an interesting short due to the 40% drop in Hong Kong tourism, which was one of their strengths last year.  $2,000 is $85Bn and that's tough to justify, even of they do get earnings closer to $5Bn (17x) but last year was $4Bn (21x) so somewhere between is where we are on the assumption of 10% growth:

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 6,793 8,442 9,224 10,743 12,681 14,527 14,749 15,190 16,499 +16.4%
    Operating Profit $m 2,412 3,073 3,259 2,843 4,530 5,341 5,193     +17.2%
    Net Profit $m 1,893 2,422 2,551 2,135 2,341 3,998 4,157 4,442 4,809 +16.1%
    EPS Reported $ 36.1 45.7 49.5 42.6 74.5 82.3 89.2     +17.9%
    EPS Normalised $ 36.1 45.7 49.5 58.4 75.1 82.3 89.2 102 115.9 +17.9%
    EPS Growth % +30.6 +26.5 +8.3 +18.2 +28.6 +9.5 +6.0 +24.0 +13.6  
    PE Ratio x           23.9 22.1 19.3 17.0  
    PEG x           1.00 0.92 1.41 1.32
    Profitability

    I was already thinking of them as a short (slowly making a Short List) since GOOGL's new travel engine is very dangerous for them.  Also, Shatner is out so less visability and they are trying to coast to save ad money but I'm not sure that's a good idea in the travel biz.  AMZN is also getting into travel booking.  

    Though the stock looks impressive in the short run – they actually have been underperforming the S&P since last year:

    I think for the STP, I'd like to play BKNG this way:

    • Sell 2 BKNG Jan $2,000 calls for $120 ($24,000) 
    • Buy 2 BKNG 2021 $2,100 puts for $280 ($56,000) 
    • Sell 2 BKNG 2021 $1,900 puts for $190 ($38,000)
    • Sell 2 BKNG Jan $1,800 puts for $50 ($10,000) 

    That's a net $16,000 credit on the $40,000 spread so + $56,000 if it all works out but this is more of a Butterfly Play (but short) where we hope to exploit our ability to make $34,000 in 4 months selling puts and calls.  Ordinary margin on the short calls is $76,792 so not something you want to do if you don't have a PM account and, even then, the risk is still severe but it's a good teaching tool and we can afford to lose $20,000 in the STP if things go wrong (hopefully not too wrong). 

    Earnings are going to be early November so we have 2 months to see how it goes before violence is likely.  This is dangerous for all the reasons I outlined to 8800 above! 





  27. Value vs Growth Stocks – Seems to me that the value stocks are playing a whole lot of catch-up today.  Makes me nervous when I see large moves in my portfolio like I'm seeing today with the broader market flat:  CLF, HBI, M, OIH, RH, THC, WBA.

    Will be interesting to see if it sticks through the week.


  28. Propped back up into the close – happy Monday.

    Nervous/Buckeye – Me too, seems like we're reaching the end game.

    I expect to make a morning post tomorrow but not sure if I'll have any time at all during the day.   I'll catch up in the evening on questions – if any.


  29. Nice one on GME Phil. Got in a few days earlier on Albo’s reasoning (shout out) and looks like you moved it higher. 


  30. TSG, a friend turned me on to this one. Looks like FOX is going in on sports betting and with growing interest and states opening up sports gambling looks like a nice one. What do you think Phil?


  31. Good morning!

    Thanks Jomp and thanks Albo, I forgot you mentioned GME but you must have planted the seed that got me looking at them!

    TSG/Jomp – $4.5Bn?  They do have great growth, close to 30%, but how big is the space actually as there is a lot of brand-name competition – including big players like Fox, though they own 5% of TSG with an option to buy 50% over 10 years, so I'm not quite sure what the intentions are.  $5.4Bn in debt is also tough to swallow, the company has to get to $5Bn in sales (+150%) and drop $1Bn (20%) to the bottom line for 10 years before you get your money back at $4.5Bn – that's pretty speculative!