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.
SPY’der Pig Spy’der Pig!
Well it surely has been a lifetime (one month) since I last posted but don't blame me much because life has become much busier and time consuming. Don't worry though I won't leave fellow freaks without some delicious charts before I return to the freakishly busy life of mine .
First off for some humor Here's my Inspiration to the awesome title. 
Ok so without even mentioning any recent news because I really don't care if the Economy officially came out of recession last summer or if Larry Summers will finally leave his post at the end of the year because I am a technical trader and I like to trade what I see rather than what I hear. If I traded what I heard then I would be a BOOOYAH Cramerica Fan which would have made me millionaire by now if I had invested billions.
Lets start off with an hourly chart for the past 20 days of the SPY so we can see what happened while the blog was inactive.
I will not reveal the indicators of lines used in the chart but with some trial and error you might be able to figure it out . As you can see starting September 1st the market broke above the blue line while at the same time volume picked up and a special indicator went from red to green. SPY at the time was around 107 and today it reached a high of nearly 115.
Thats great and all as we see what happened in the past but what about the "Freak"ing future? I am not calling a market top yet but I must make my intentions known that if either 115 or 113 are broken on the hourly while the volume is there then that will determine the future. If I were to call it? I would say the volume increased the last two hours of today's trading thanks to Ben Balloonhead and the special indicator below is heading downhill (but still green). My ideal trade would be when SPY cuts below 113 and the indicator turns red. Remember that even if what I am preaching does not happen at least it is a more informed decision than pressing a "Buy Buy Buy, Sell Sell Sell" button. (Click Image below to Enlarge)
Next up we will visit something I like to call the Bollinger Bands and again I will not reveal the inputs but I hope you are understanding (you can always figure it out with some hard work), as you can see I have also shown the signals my system has given to me. I am awaiting for that Sell signal which might send SPY to 110's at the very least if it displays me that lovely red "S". of course there have been times where the market just consolidates along the blue lines and then moves up in which case I wouldn't enter until I see my system print the signals while I also evaluate the chart already posted above.
Are you falling asleep yet? If so you aren't a real Investing Freak because only the elite know that without doing your homework you will go into the market like a headless chicken and come out a loser. Now Time to introduce the updated Investing Freak special chart which I last displayed back in June. If you click on the link and go to that post you will see a "price line" drawn near 1152 (it's really just a bit over 1150 if you get microscopical), I mention that because today the market reached up to 1048.59 and retreated a full 10 points! 10 points is a sweet intra-day move which you can make a killing on if you play it right. Anyways here is the updated chart since I can see you falling asleep. (Click below to Enlarge)
Recap: I've been busy, market has been behaving according to plan and is not showing more negative signs than positive but no definite reversal has been noticed so just use the charts above for reference. If they are helpful, you are welcome to post comments so we can liven up the blog again.
Until next post.... Enjoy Making money!!
-K
Existing Home Sales Plunge, Unemployment to do the reverse
Existing Home Sales which are more important than the new home sales data plunged over 27% year over year, the amount of sales was the lowest since 1995. At the current pace it will take over 1 year (yes 12+ months) to sell the existing houses out there.
People have begun losing their jobs once again after a few months of lowering unemployment claims. How do I back this up? No data other than I now have more than one close acquaintance that within the next 2-3 weeks will receive a pink slip. They survived during the worst of it all and now employers are deciding its time to let go. Thats amazing! Keep your profits because you wont be making as much money in the future with 15% of the american workforce unable to afford staples such as bread without a food stamp.
On the currency front according to ZeroHedge
And once again, all of Europe is dumping its deposits in Switzerland, running away from domestic banking centers, and making the lives of Hungarian CHF-denominated debtors a living hell. The EURCHF just hit an all time low of 1.3066. The Bank intervention sonar just went apeshit as both the BoJ and the SNB are fully expected to intervene at any moment.
Technically Speaking? See for yourself how the market has acted recently especially since I officially returned from break August 6th.
K- August 6th, 2010
vacation just ended today so it will take me at least a week to slowly get the groove back. be patient this time...
Euro/Usd and SPX have been in a water slide since. Its hard getting from Information overload mode to 2 month no internet and back to information overload so I tire out by all the information I once processed in a usual day so the recovery process puts me on tract to return trading right after labor day and the Special chart that hasn't been posted here in a bit as well. (Click to Enlarge)
Happy Trading and make money trading not listening to baldies at CNBC unless he entertains you and the advice isnt followed.
-K
Debt Reducing Tuesday
Bennie Balloon Bernankie has something to say about the koolaid.
“My best guess is that we’ll have a continued recovery, but it won’t feel terrific. Even though technically we’ll be in recovery and the economy will be growing, unemployment will still be high for a while and that means that a lot of people will be under financial stress,” he said. Via CalculatedRisk
But there is GREAT NEWS...You can use your credit card to Help Reduce National Debt. Via The Mess That Greenspan Made
Its ok that everyone is financially strained you are still welcomed to help especially if you have a credit card with 13 trillion dollar limit. 
There are two ways for you to make a contribution to reduce the debt:
- You can make a contribution online either by credit card, checking or savings account atPay.gov
- You can write a check payable to the Bureau of the Public Debt, and in the memo section, notate that it's a Gift to reduce the Debt Held by the Public.
And as mentioned yesterday the G20 Meeting relied more on taking the koolaid away and tightening the belts of the countries.
Here's what Germany decided to do:
Germany will cut child payments, pare government payrolls and boost taxes on energy firms with nuclear power plants in an effort to save 81.6 billion euros ($97.6 billion) between 2011 and 2014 in a package approved by Chancellor Angela Merkel's Cabinet on Monday. -Marketwatch
and how it would look if the United States did something very similar. (Click the option to View as One Page for easy reading)
Of course all these news were already priced in today and greenshoots galore tomorrow.
Make money!!
Market Correction: Special Edition Results [Animated Charts]
If you've been following my blog recently you might have noticed my April 28, 2010 "Special Edition: Here comes the red ink, correction begins."
On April 27th The SPX stood at 1183 and it swung as low as 1065 during the past 7 trading days to ultimately close at 1110.
As I wrote on the 28th
I finally had time to check on the market a big grin came to my face. A lot went on today and news blamed Greece and Portugal downgrades for the sharp drop. Nobody ever talks about the technical analysis because it is beyond the mind of Joe the Plumber.
The first chart was the EUR/USD which broke an ascending triangle on the daily back in December. Below is an animation of Apr 27 and May 7 to show the move. If you have trouble viewing the animated image please leave me a comment because it's the first time I'm using animated content. (CLICK TO VIEW ANIMATION)
Next we'll move onto the $TED Spread which jumped nearly 100 percent since the 28th. (Click to View Animation)
Lastly I will leave you off with the Investing Freak Special SPX chart animation. Boy was this a move, the red line is the 250 day moving average in case you are wondering. (Click to View Animation)
Where do I see us heading from here? We still haven't broken some key supports such as the 1088 trendline and the 1060 250Day moving average. So if we drop another 50 point we will still be good to go for a bounce. If more crazy days are upon us? I will check with BID ( Sotheby's ) to see if it's gone below 22 to initiate heavy short positions.
Thats just me and as always these are my opinions and even though they work for me I cant guarantee them working for you.
Have a good weekend and be on the lookout for the latest Current Picks signal changes coming up this weekend.
-K
Special Edition: Here comes the red ink, correction begins.
It was a busy day today and when I finally had time to check on the market a big grin came to my face. A lot went on today and news blamed Greece and Portugal downgrades for the sharp drop. Nobody ever talks about the technical analysis because it is beyond the mind of Joe the Plumber.
Let's start off with the Eur/Usd which I have closely followed since December when it broke a long term trendline. I hadn't looked back at it since and I was shocked. Here is the first in a series of Special charts.
Next on the list is $TED which stands for the Treasury - EuroDollar Spread. You can read more about what Ted is on this November post if you are not familiar with it.
WHile the spread of 0.2 is still fairly low and below the average of 0.5 the fact that it is increasing and the moving averages are making their first crossup since before the October 2008 crisis strikes me as interesting especially given the current economic situation.
While on the subject of Europe lets check out the Greek Index $GRDOW which I wrote about on April 11 and that turned out to be the opposite of what I expected. From a low of 124.17 on March of 2009 the Greek index went through the roof at 267.40 and as of close today it stands at 138.11. Go Greece!!!
Now lets take a look domestically at BID - Sotherby's which as I mentioned on March 14th's post is Part of my indicators arsenal. BID fell from 37.75 to 34.93 today which broke a short term trendline but also another big move would put it below the 32 mark that is the next strong support. Since the March 2009 lows of 5.85 BID is up 666% to as high as 39! That's nearly 47% a month. A move below 32 (20% drop from 39) would tell me to wipe the dust off my ammunition and a move under 22 (40+% drop) would just signal that Chaos is back and since this is a Leading indicator to me it would highly influence my positions.
Lastly I will leave you off with the Investing Freak Special SPX chart that I last posted on April 14th. We hit a top, retreated a bit below the blue moving average then made a higher high at 1219 but this time it was different as the retreat didn't land on solid ground and we fell through.
Class Dismissed.
-K
Nightly Recap 3-24-2010
Market Summary:
DOW -52.68 (10,836.15)
S&P -6.45 (1,167.72)
Nasdaq -16.48 (2,398.76)
Nightly News Links
US Economy:
Durable Goods Jump on Continued Strength in Aircraft (Econompic)
Orders for big-ticket manufactured goods rose for a third consecutive month in February, bolstered by strong demand for commercial aircraft and machinery. The
hope is that continued strength in manufacturing will help sustain the economic recovery.
The Commerce Department said Wednesday that orders for durable goods advanced 0.5 percent last month, slightly lower than the 0.7 percent gain that economists had expected.
Chicago Fed National Activity Index (Chicago Fed) [PDF]
Chicago Fed National Activity Index is a surprisingly good forecaster of economic activity. The Chicago Fed National Activity Index (CFNAI) is a monthly index constructed to summarize variation in 85 data series on U.S. economic activity.
New Home Sales Plunge To New All Time Record Low (Zero Hedge)
New home sales drop to a record low adjusted annual rate of 308K. All of the government's housing stabilizing measures are now a disaster, as existing home sales inventory surges to nearly 9 months, not counting the shadow inventory, which is more than double.
World Economy:
China: Sale of residential land temporarily halted (China Daily)
The Ministry of Land and Resources has ordered a temporary ban on the sale of land for housing in a renewed measure to ease soaring real estate prices.
Yun Xiaosu, vice-minister of land and resources, said local authorities should not sell land for residential purposes until this year's housing land supply plan is released in early April.
"Residential land supply will increase and low-income housing projects will top local governments' agendas," Yun said during a video-conference on Monday.
Getting Technical: Trouble Brewing in Europe (Barrons)
News that Portugal's credit rating was downgraded by one of the major ratings agencies sent a shiver across the European Union.
The question on investors' minds is whether this is the start of something bigger or just a contained incident. After all, Greece's problems did not take down global markets.The stock market, however, might have the answer and it is not good. Technical death crosses -- when key short-term moving averages move below longer-term moving averages -- have occurred in several of the troubled markets. Most will agree that the stock market looks forward to events expected to occur perhaps nine months down the road. It is one way we can explain why stocks rallied a year ago when the financial world was in danger of collapse. "We ain't seen nuthin' yet"
Have a Good Night
-K
Two picks: AIB and AMD
This is my first blog post here. As a friendly note, I assume no responsibility or liability for your trading and investment results. Do not forget, this website is solely for entertainment purpose only.
Today the trading day started with generally high buying demand and ended the same. My two picks for today are: AIB and AMD.
| Company | Buy Date | Sell Date | Buy Price | Sell Price | Gain/Loss |
|---|---|---|---|---|---|
| AMD | 5/18/09 | - | $4.1399 | - | - |
| AIB | 5/18/09 | - | $2.89 | - | - |
All indicators aside, I think AIB is one of the financials that is undervalued. According to Zacks.com, in its first quarter trading update, AIB "announced that operating profits before bad debt provisions were higher than the year-ago quarter, reflecting strong performance of its Capital Markets and Global Treasury divisions." That not to say that they do not have problems- they still experience declines in operating profits, net interest margins shrink, etc. The point is not many institutions are problem-less. As of the close today, the stock is at $2.90 so it is still a penny stock. Most likely it will be a longer term play for me.
AMD is a pure technical play. It has a major support somewhere between $4.07 and $4.12 (as indicated on the graph below). I bought it at $4.1399 hoping that it will break its trend of fluctuating and find its way up. It did surge, but not as high as I was expecting. The bears and bulls are still fighting. Depending on pre-market, I will most likely sell this stock in order to break even (including commissions).
The Dow Jones Industrial Index has not yet bottomed.
The Dow Jones Industrial Average doesn't appear to have bottomed out as of today.
The news that are coming are still not good and the technical chart all points to even lower market soon.
