Stock Talk Update: $RIMM Research In Motion play cost me 18.5%
I last wrote about $RIMM a day or two before their 6/16 earnings "Research in Motion near 2009 Lows" and at the end of that article I mentioned that I had an intention of Buying some RIMM within the week.
Well ladies and gents in honor of full transparency I did create a small position on 6/15 at 35.43 and closed it the day after earnings at 28.86 for a loss of -18.5%.
Plenty of things I wrote in the previous article including the charts were a clear warning for me to steer clear especially near earnings but my fatal flaw of chasing risk got the better of me.
Once again here is the chart I posted on the 15th at midnight (after which I acquired shares right before close that trading day). Clearly this is a downtrend with the major moving averages on top which naturally become resistance (plenty of gap-downs too).
I also mentioned that in the SEC filings the company made it clear that one of their biggest risks is being too slow to roll out competitive products and they have patent infringement aplenty which haven't been settled. And as soon as I acquired my stake even before earnings came out I missed this news:
Dolby Laboratories said Wednesday it has filed patent infringement lawsuits against Research In Motion in the United States and Germany and is seeking to halt sales of devices made by the Blackberry maker.
RIM is using Dolby's patented technologies in its Blackberry smartphone and Playbook tablet computer without having obtained licenses, Dolby said.
Dolby said all of the other major smartphone makers have agreed to license the Dolby technologies.
Source: Associated Press (Jun 15, 2011) "Dolby files patent infringement lawsuit against RIM"
What blinded me the most in this case is the magically low PE ratio which I mentioned being at 5.63 and even here I laid it out in the article i wrote to the world!
"P/E ratio isn’t always indicative of an undervalued stock and it might well be the case that RIMM has lost its edge." I don't listen to myself too well it seems and that cost me dearly.
Of course now that the PE is at 4.48 and the stock suffered another gap down isn't it time it fills them all? This is a good long term investment now right? Well dear trader/investor/friend that is up to you and your trading rules. Nobody can predict the future of a stock or anything in life but educated guesses lead to better probabilities. Alas this is the end of RIMM coverage from the freak. 
Stock Talk: $RIMM Research In Motion near 2009 Lows
Upon the nightly stock pondering I decided to repay my old pal RIMM a visit at FINVIZ.com
I had last checked this stock out in early April and was in for a surprise. it has since gone south around 45% and its sitting at a low PE of 5.63 (although to be fair it has had a decently low PE for a while). P/E ratio isn't always indicative of an undervalued stock and it might well be the case that RIMM has lost its edge. I got rid of my Blackberry device in favor of android back in April hence why I forgot about this until now.
Reading their SEC filings it is obvious that the company is failing due to it being too slow to roll out competitive products and also because it has infringed on many patents there are dozens of Litigation's going back to 2007 until recently March 2011 that are still work in progress.
Ran the annual income statements and balance sheets for the past 3 years through my valuation worksheets and the 3 year average Z-Score is very healthy, net profit margin has still remained in an uptrend and so is the total Asset Turnover. Return on equity and Return of Assets are also in a 3 year uptrend while gross profit margin has dropped 4 percent. The liquidity ratios are mixed but for the most part also good and the company has no debt, $288 million in cash and a total of $2.6 billion in cash/cash equivalents and investments so at the current $19 billion market cap they have 10% cash.
Here is a weekly chart with the $35.05 low from back in March of 2009.
If we were to go back even further there is support to the downside at 34.65 area in the weekly and at that point $RIMM might as well be done but fundamental and technical play this deserves a short term move to the upside so I will watch closely and might initiate a position on the long (BUY) side in the next 7 days. Already have a buy limit in at a lower price in case I sleep in or forget to check it for a few days.
Update: RIMM has Earnings on 6/16/2011 Afterhours
A Tale of two Companies: Netflix ($NFLX) and Blockbuster (BLOAQ)
If you are reading this blog that means you are part of the online revolution which has sped up the way we conduct business and also the way we spend our leisure time.
The recent years have brought user generated videos, tv episodes and even full movies to the web. Gone are the VHS and DVD days where it cost $6-7 to rent a movie and in are the $10-15/month to watch unlimited movies. The company that revolutionized this was Netflix a few years back and that caused dear ol' brick and mortar Blockbuster to go belly-up.
Well Gentlemen and Ladies the beast is awakening from its two year sleep. In what might turn out to be a lengthy blog post I will be evaluating both Netflix and Blockbuster because in another week (December 15th) Blockbuster is expected to file its reorganization plan.
Lets start with Netflix $NFLX king which Since January 2010 alone is up a whopping 245% from $55 to $190 a share. Being a technical analysis freak I always look at the chart to see how the stock has done in the past and whether its shot up too far from the ground (my moving averages trio) and as you can see below the real ground is the 110 ema which right now stands at 151.37. I also use two shorter term averages in case I don't want to wait for a stock to go that low but with Netflix being $40+ above ground I am willing to wait. (Click Image to Enlarge)
Sure sure technicals are one thing but I also like to look under the hood at fundamentals. I plug balance sheet, income statement and other data into my system and what I get is an all in one visual of different ratios. The profit margins have increased over the years and that is a positive thing but Netflix's equity multiplier has increased from 1.78 to 3.41 which is basically doubled within the year and that signals to leveraging, all the profitability ratios are also good, but when we get to Liquidity ratios such as current and quick ratios we see a different story, Netflix has become more illiquid for better or worse. Lastly Long term debt to total assets has gone up significantly from 6% to 35% within a year so that might be a warning shot. And Finally the past few day Netflix has been under the influence of mostly negative news and especially tonight's after-hours news of its CFO "retiring".
Netflix receives a score of 57% (out of 100 of course) based on my hybrid system of technical analysis, fundamental and news and on we move into Blockbuster.
When was the last time you heard about Blockbuster? My educated guess would be around 2007 when they stopped advertising (started going belly-up). Well I do have some news for you and the news is that the Yellow and Blue logo is making a comeback but first lets keep the layout somewhat organized (neat freak) and start off with a chart.
Below is a chart using the exact averages as above but this one isn't as pretty and Blockbuster (BLOAQ) former $BBI has been "under ground" for quite some time. Even with the recent doubling of its price from 5 cents to 10 cents the ground hog hasn't been able to stick its head above the 12 cent ground for long. Back in May the ground hog (Blockbuster) poked its head, didn't see a shadow and that resulted in 6 more months of winter. So technically speaking, 12 cents has to be broken before the stock goes anywhere gooood. (Click Below to Enlarge)
Just because Blockbuster stock is yet to break out, that doesn't mean that the company isn't making steps into a re-emergence from bankruptcy. As mentioned in the beginning of this article Blockbuster should be submitting its plan on December 15th, meanwhile they have just closed 18 more physical stores in a move from offline to online media. For those of you that like purchasing dvds at a physical location, NCR Corp operates RedBox-like kiosks with Blockbuster logo and movies. Tests on about 900 kiosks are being run now in San Francisco, Miami etc to see if people would pay $3.99 for the first night to rent a new movie 28 days before it comes out to Netflix. Going into bankruptcy it had $1 billion in debt and coming out it is expected to have $100 million or less.
Just a few weeks ago Blockbuster received court approval for $20 million in advertising, it had not advertised since 2007 and they have already begun with a few ads showing their competitive edge of providing movies 28 days earlier than Netflix the ad campaign is called "Less Waiting. More Watching."
Another thing i noticed while looking website statistics and info is that when you search "new releases" on Google Blockbuster.com is #3 ranked and Netflix is #10.
Ok so why would I (or You) as a consumer want to pay $11.99/month for the 1 Dvd plan when Netflix is $9.99/month right now?
Well there is a big reason why I highlighted "right now" because it is the main reason Blockbuster is the only one to offer movies 28 days earlier since it costs $3.99/movie.
With Netflix's recent fame in the stock market more companies such as the movie studios will want to suck more money out of them and they (Netflix) will pay higher prices for the movies. At this moment either Net profit margins will begin declining if the $9.99 price is still valid or Netflix will be forced to charge $10.99, 11.99 12.99 etc and that will drive users to other competitors since the price advantage is no longer valid.
With the new campaign, Blockbuster's ad spending next month is to be three times as high as it was last December. The final month of the year is traditionally one of the most lucrative for the company, as summer event movies come out on DVD and families watch movies together over the holidays.
I will leave you with Blockbuster's new ad campaign that came out less than a week ago.
What a crook I would be if I didn't disclose my holdings. Short NFLX via option puts and long Blockbuster.
BP Cares about the small people
As you might have figured out by now, BP plc (ADR) Chairman and the CEO met with President Obama ONLY two months after the oil spill disaster.
Of course as I mentioned in the previous post BP now stands for Bad Publicity so nothing was unexpected on my end when the Chairman said: "I hear comments sometimes that large oil companies are greedy companies or don’t care, but that is not the case with BP. We care about the small people." Bad publicity this time will cause BP to buy google ads for keywords such as petite, small, midgets, oompa loompa. They needed a leprechaun to give them some lucky charms but now they insulted the small guy.
Did you hear that? BP cares about you so much that if you are in the Gulf of Mexico and for the next century your fishing or tourism business is doomed.. BP has put together $20 billion dollar fund for your damage It is truly truly truly sorry. Oh and If you weren't affected by BP but are part of US pension funds – including Calpers, the Teacher Retirement System of Texas and Ohio Public Employees Retirement System then BP is truly truly truly sorry for you as well because the 12% dividend yield that you saw a few days ago will be reduced to 0% so they can spread that wealth to the victims. You can enjoy your -50% gain in BP stock now.
But wait I forgot to mention one benefit of this disaster. BP has hired cleanup workers to clean things up and this good news for the people of the Gulf. Hey you just got promoted from fisherman to fish rescuer, Congrats!! Just sign here on the dotted line ........... and just make sure to not get sea sick from the delicious fumes because your complaints and health information will never be part of BP's record.
BP attempted to deny and conceal links of its oil spill to illnesses, after initial reports of oil cleanup workers who were getting sick due to extended exposure to oil and dispersants. Fishermen have complained of “severe headaches, dizziness, nausea and difficulty breathing” after working to clean up the spill, and one said BP did not provide protective equipment. But BP CEO Tony Hayward brushed off illness concerns, suggesting “food poisoning” might have been the culprit.
Although Louisiana state records indicate that at least 74 oil spill workers have complained of becoming sick after exposure to pollutants, BP’s own official recordkeeping notes just two such incidents.
You all should feel sorry for BP Because it will take anywhere from 100 days to 365 days for BP to make back the $20 billion in profit while the victims sit at home and receive checks.
Ok fine that's less than a year's worth of profits... But this is just a fund for economic damage, and won't protect it against all sorts of other legal costs. According to NYT legal costs and criminal fees could hit at least $63 billion. WHOOPS! Hey NYSE:BP stock... you will be missed when you hit $19 but on the bright side! You'll be a teenager again full of energy (pun intended) !
And now for a mini change of subject. Senate has now accepted an expanded Fed audit. The House proposal allows repeated future audits of discount window and open market transactions, whereas the Senate proposal had only allowed a one-time audit. Of course this is just a grain of salt and even when it's passed it might be years before we see any audits.
Current Stock Signals 5-15-2010
Due to my time constraints in the next two weeks I will be posting more sporadically. Here are the current signals for symbols I follow.
You can also find this at the top on Current Picks Page.. I hadn't updated it in two weeks but as you can see the major signals are from late April so nothing was missed.
My System caught onto the downdraft about a week before the "fat finger" occured and from what I just observed going through these charts is that the "fat finger" was very skinny and precise... nuff said because I need to keep this one a secret. Enjoy
Market Indices and other important Quotes
(Note: I understand you can’t purchase an index so bear with me these are just signals)
| Symbol | Buy Date | Sell Date |
| $SPX | 4-27-2010 | |
| $INDU | 4-30-2010 | |
| $COMPX | 4-30-2010 | |
| QQQQ | 4-30-2010 | |
| IWM | 5-12-2010 | |
| SPY | 4-27-2010 |
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Rest of the Symbols (More will be added per request)
| Symbol | Buy Date | Sell Date |
| IYR | 5-14-2010 | |
| AAPL | 5-4-2010 | |
| DRYS | 4-19-2010 | |
| SDS | 4-30-2010 | |
| SRS | 5-14-2010 | |
| SSO | 5-14-2010 | |
| SKF | 4-30-2010 | |
| JNK | 5-14-2010 | |
| HYG | 5-14-2010 | |
| REW | 4-27-2010 | |
| QID | 4-30-2010 | |
| QLD | 4-30-2010 | |
| XLF | 4-26-2010 | |
| DIG | 4-28-2010 | |
| DUG | 5-14-2010 | |
| SMN | 4-30-2010 | |
| VXX | 4-27-2010 | |
| BBT | 5-10-2010 | |
| BID | 5-11-2010 |
Make Some Money... Ok A Lot of Money!
-K
Weekly Picks- Buy:IYR,XLF Sell:DRYS,SRS,SKF,SMN,VXX
This week was mostly a reversal of calls made last week, the only new call is a Sell on DRYS.
When the week moves in a range (market Zig Zagged 30 points up and down) they are called False Signals because my system is a trending one.
Nobody has called me out on my calls but this is the first back to back week that signals have reversed in my blogging days so I thought I'd clear the air .
I will be introducing a new Feature this week. A chart to accompany each call. The charts are 3 months and they show all signals that might have occurred during that time-frame.
Red Dots means SELL and Green dots signal BUY. Simple enough? Great Let's get started.
Here's a look at SPY SPDR S&P 500 ETF Chart
(Click to Enlarge, Same goes for the rest of the charts)
Upgrades
IYR iShares Dow Jones US Real Estate (ETF)
Upgraded to BUY on Apr 21 at $52.23
XLF Financial Select Sector SPDR (ETF)
Upgraded to BUY on Apr 21 at $16.74
Downgrades
DRYS DryShips Inc.
downgraded to SELL on Apr 19 at $6.20
SRS ProShares UltraShort Real Estate (ETF)
downgraded to SELL on Apr 21 at $26.98
SKF ProShares UltraShort Financials (ETF)
downgraded to SELL on Apr 20 at $17.32
SMN ProShares UltraShort Basic Materls (ETF)
downgraded to SELL on Apr 23 at $32.37
VXX iPath S&P 500 VIX Short Term F
downgraded to SELL on Apr 20 at $18.27
Disclaimer:
I am only giving the latest signal for the stock mentioned. Use at your own risk and make sure to take the date into consideration. If you have been trading for a while you should have realized that relying solely on the strategies of others (think Analyst Opinions) will lead to failure so please only take the signals I provide just as another indicator in making your informed BUY or SELL decision. Now go Make some MONEY!
-K
State Street Corp. Options Fun
I don't have the time tonight for a nightly recap so I will highlight one of my trades.
I shorted State Street Corporation on April 13 because of gut feeling (always follow gut) and sold April 20 via writing of May 49 strike calls.
Here is the chart with the entry and exit points. Here is the link to the option if you were wondering finance.yahoo.com/q?s=SPJ100522C00049000
I don't have time for the nightly recaps but I will leave you with an updated chart that you will like. (Click To Enlarge)
1 Week play = 80% Profit. I took profits because you can never be too greedy especially when there's only $25 left on the plate.
Have a good night and make some money!
-K
Weekly Picks- Buy:SRS,SKF,SMN,VXX Sell:IYR,XLF
The Current Picks page has been updated. Have a look by clicking Current Picks here or up on the top of the page.
Below I will only mention the new signals that have occurred this week.
Upgrades
SRS ProShares UltraShort Real Estate (ETF)
upgraded to BUY on Apr 16 at $29.18 (SELL Apr 05 at $28.60)
SKF ProShares UltraShort Financials (ETF)
upgraded to BUY on Apr 16 at $18.11 (SELL Feb 16 at $24.17)
SMN ProShares UltraShort Basic Materls (ETF)
upgraded to BUY on Apr 16 at $34.01 (SELL Mar 29 at $34.95)
VXX iPath S&P 500 VIX Short Term F
upgraded to BUY on Apr 16 at $19.97 (SELL Feb 11 at $31.40)
Downgrades
IYR iShares Dow Jones US Real Estate (ETF)
downgraded to SELL on Apr 16 at $50.24 (BUY Apr 05 at $51.05)
XLF Financial Select Sector SPDR (ETF)
downgraded to SELL on Apr 16 at $16.36 (BUY Feb 16 at $14.34)
Notes:
URE and UYG are off my list after the splits because of charting issues.
Disclaimer:
I am only giving the latest signal for the stock mentioned. Use at your own risk and make sure to take the date into consideration. If you have been trading for a while you should have realized that relying solely on the strategies of others (think Analyst Opinions) will lead to failure so please only take the signals I provide just as another indicator in making your informed BUY or SELL decision. Now go Make some MONEY!
Have a good weekend.
-K
Are Greek stocks ready for a comeback?
With all the recent bailout talks for Greece it might seem like a good time to short Greek assets right? No!
The risk rewards at this point have been cut in half. I will display a chart below of the Dow Jones Greece Stock Index $GRDOW.
Here is a 3 year chart with no comments. (Click to Enlarge)
Here is the 1.5Year chart showing a different story.
You see... Greece did hit bottom at the same time as the entire market did as well back in March of 2009 BUT Greece topped out in October of 2009 and started its next leg down.
From March-October 2009 the index rose from 124.17 to 267.40!
Thats 143.23 point gain or 115% Gain in 8 months... and here we are complaining that our market has gone up 75% and is overdue for a correction.
Now as we can see from the chart below Greece then took a turn from 267.40 to 150.84 in February of 2010 (and it might be making a lower low coming up if the bailout saga isn't fully discounted yet) the 116.56 point drop from the October 2009 peak to the temporary February 2010 bottom is a 43.5% correction!
Back to my original question... now do you see why I said no to shorting the Greeks? 44% Correction has already occurred and even if there is another 150 points to the downside (another 50% or so) the risk reward is no longer there. I might be looking to buy up some Greek Gyros or Banks soon to play. One such play is National Bank of Greece (NBG)
Here is the chart for NBG to compare to the entire index. Also Notice the Recent Volume (Click to Enlarge)
Thats all for tonight folks. Have a good night and a good trading day tomorrow.
-K
Current Picks Updated 4-11-2010
The Current Picks page has been updated. Have a look by clicking Current Picks here or up on the top of the page.
Below I will only mention the new signals that have occurred this week.
IYR upgraded to BUY on Apr 05 at $51.05 (SELL Mar 26 at $50.10)
URE upgraded to BUY on Apr 05 at $8.55 (SELL Mar 31 at $8.14)
JNK upgraded to BUY on Apr 08 at $39.61 (SELL Apr 1 at $39.51)
HYG upgraded to BUY on Apr 08 at $88.31 (SELL Mar 31 at $87.50)
SRS downgraded to SELL on Apr 05 at $5.72 (BUY Mar 31st at $6.04)
REW downgraded to SELL on Apr 05 at $20.54 (BUY Apr 1st at $21.06)
If you've been following the current picks you might notice above that these are reversed calls from last week. you have to understand that there are fake-outs but I only update the page once a week. On the works is a subscription plan where i would update it for members every 1-2 days if signals changed. For now let's enjoy some recent highlights.
Recent Highlights:
AAPL from 224.75 on March 22nd to 241.79 of close Friday.
DRYS from 5.88 on March 29th to 6.56 of close Friday.
DIG from 34.27 on March 30th to 37.07 of close Friday.
Disclaimer:
I am only giving the latest signal for the stock mentioned. Use at your own risk and make sure to take the date into consideration. If you have been trading for a while you should have realized that relying solely on the strategies of others (think Analyst Opinions) will lead to failure so please only take the signals I provide just as another indicator in making your informed BUY or SELL decision. Now go Make some MONEY!
Have a good weekend.
-K