Market sentiment feels bleak. A throwback rally is on the horizon.
Added to RSX @ 22.85 on morning desolation, and closed it @ 23.18. That may be the extent of any rally. Closed SSO @ 112.12 (opened 110.80 near Tuesday's close). Still holding RYTNX (Rydex 2x SPX), RYWVX (Rydex 2x Emerging Markets) and RYEUX (Rydex Europe). Small position in LEJU.
Not sure I'll make this morning's date with Jack Flash. If NGas spikes, I might think about DGAZ. But that would expose me to a dangerous short squeeze. If NGas plunges, the safer trade might be reentry into UGAZ.
ReplyDeleteFWIW, from TD, downgrade of BXE:
ReplyDeleteGrowing Pains Continue to be the Theme in H2/14
Event
Bellatrix announced Q2/14 results before the market open yesterday.
Impact: NEGATIVE
Although results were generally in line with our estimates, CFPS was lower
than Bloomberg consensus and infrastructure bottlenecks continue to result in
short-term production curtailments. Offsetting these concerns are operating
costs that continue to improve and 2-mile Falher wells that continue to post
impressive production results even at restricted rates.
The key highlights are:
Production was marginally below the previously released field estimate
of 36.6 mBOE/d and CFPS was in line with TD but slightly below
consensus of $0.42 (Bloomberg, 11 estimates).
2014 capex guidance has increased to $515mm (from $500mm). As a
result of this and softening commodity prices, cash flow guidance has
dropped to $350mm (from $370mm) and net debt guidance has increased
to $390mm (from $355mm). Production guidance is unchanged.
We have tempered our production estimates to reflect continued
production constraints until the company's owned and operated gas plant
comes on stream in mid-2015, a meaningful catalyst in our view.
TD Investment Conclusion
In our view, Bellatrix has done a tremendous job of accelerating value on its
asset base through three strategic joint ventures over the course of 2013.
Infrastructure constraints have been a recurring theme for the stock in 2014,
and we believe that investors will remain fixated on the short term until a
resolution is reached in this regard. This is reflected in the discrepancy
between our EV/DACF and NAV-based valuations (Exhibit 4).
Crap! :(
DeleteJust one person's opinion. The company is cheap and growing well. TD thinks short term concerns will override, but that may or may not be correct.
DeleteNorth America is producing more energy now than in decades, right? Will it be enough?
DeleteI thought BXE experiences a disruption and that was resolved. Infrastructure constraints relate to location of production, West Tx. is even building pipelines like mad.
DeletePipeline construction contractors.
LEJU off @ 12.17.
ReplyDeleteDumped the rest of my RSX @ 23.24 (basis for the first half was 23.6x).
ReplyDeleteAnother perspective - copied it here as behind a paywall:
ReplyDeleteRosenberg: Canadian stocks no longer cheap relative to U.S.
Wednesday, August 06, 2014
Darcy Keith
Print this article
Canadian stocks are no longer looking so attractive relative to south of the border, according to David Rosenberg.
Inside the Market readers may remember the Gluskin Sheff chief economist, who rose to investing fame by becoming one of the first to forecast the recession of more than five years ago while at Merrill Lynch, started this year with the view that the Canadian market was trading at an “epic” discount to the U.S.
His contention was based on the PEG ratio. Popularized by legendary U.S. fund manager Peter Lynch, it’s calculated by dividing the price-to-earnings ratio by earnings growth rates over a specified period of time. The lower the PEG ratio, the more a security or market may be undervalued given its earnings performance. Generally, a PEG ratio of 1 or less signals a potential buy for investors. A ratio well above 1 suggests a security or market is richly priced.
Back in February, when looking at the three-year price-to-earnings against the three-year consensus earnings per share growth rates, the TSX PEG ratio was at about 0.92 times. The S&P 500 was at a much higher 1.33 times.
Mr. Rosenberg’s call, therefore, that Canada had more upside potential was on the mark; Canadian stocks have tripled the gains of the U.S. in the past year.
But the three-year PEG ratio for the TSX is now at 1.16, up from 0.93 just a month ago. The S&P 500 has moved in the other direction, to 1.26 from 1.42.
“Most, though not all, of the valuation attractiveness of the TSX had commanded over the S&P 500 has vanished in recent months,” Mr. Rosenberg points out today in his Breakfast with Dave newsletter. “Quite the swing in relative valuation gaps, and both markets are now within striking distance of each other.”
Breaking down the PEG ratio further, Mr. Rosenberg finds that energy and financials are near fair value in Canada, while telecom, utilities, and consumer staples are looking a tad expensive. Industrial, consumer discretionary and health care all have PEG ratios below 1 - an indication that they are going cheap.
Within the S&P 500, the sectors with the most compelling PEG ratios are technology, health care, consumer discretionary, and materials, Mr. Rosenberg said. But energy, consumer staples, financials, telecom and utilities all trade at very steep premiums relative to their earnings growth outlook.
Valuations have been a concern for some time now in both Canada and the U.S., given the persistency of the bull run and lack of a meaningful correction.
Mr. Rosenberg notes that the pullback in the market over the past week, along with analysts revising earnings expectations higher as second-quarter results flood out, are both helping a bit to restore valuations to more attractive levels.
Three-month analyst earnings per share revision ratios for the S&P 500 have gone from 0.71 in April to a three-year high of 1.11 in July (a ratio greater than 1 means that there are more upward revisions than downward.)
The industrials sector in the U.S. has really improved, going to 1.13 from 0.63 in April, and is now at the highest it’s been since June 2012. Health care and tech also have shown considerable improvement. The areas lagging the most are utilities, telecom, and consumer staples.
In Canada, forward earnings per share estimates are starting to move up the most now in energy, industrials, consumer staples, and technology, said Mr. Rosenberg. Materials, consumer discretionary, health care, financials, telecom, and utilities are seeing their outlooks stabilize or even dip.
All this adds up to not an especially bearish view of the market right now and Mr. Rosenberg certainly isn’t using the term bubble. But some of his research has led him to conclude that it will take roughly a 10-per-cent price correction to eliminate excess valuations in North American stocks.
Re JONE, from reminsences:
ReplyDeleteL.Sigurd @LSigurd 1h
pleased with $JONE q, production up 10% seq, guidance up, new frac design is a win, such a large capex spend makes me a little nervous
BTU spent a ton on capex too, and took a big hit for it but now their capex will be small going forward.
DeleteURI - Pipeline construction? - Yesterday watching TV I saw a piece on pipeline construction in Tx. and URI equipment was there in the background.
ReplyDeleteEnergy producers - Another aspect to consider is winter is coming, and probably energy prices should increase as a result.
ReplyDeleteYELP - I'm out flat $69.30 to cut it free from obligation and allow it to run like it did last time.
ReplyDeleteThat's funny bird boy.
DeleteRetest $66.50 at least, right?
DeleteBXE - $7.23 is the number we need today.
ReplyDeleteWe need to see some strength back to $7.40's though not a mere passing grade.
DeleteNice of TD to give us a downgrade following a 35% drop, wonder if he sold at yesterday's low?
DeleteWe have a 'throwback' rally this morning, but it's quite modest. I believe the indexes will continue to decline.
ReplyDelete(a) Closing all leveraged Rydex positions at the 1030 am est window: RYTNX (Rydex 2x S&P500) for what appears will be a +1% gain from basis + RYWVX (Rydex 2x Emerging Markets) for a very minor gain.
(b) RYEUX (Rydex Europe) will be closed end of day.
By end of day, my only remaining position will be a floating position in HDGE (a bear fund). Otherwise in cash.
Perhaps you meant to expect a throw-up rally. The whole nine yards complete with chunks, hairballs, socks and shoes?
DeleteCCL - Buy, from BACML
ReplyDeleteNSPH - Shorts got rich today.
ReplyDeleteNLY - I sure wish I'd just loaded the boat @ $9 instead of trying to use my (useless) brains.
ReplyDeletePlay some golf. I see kind rounded bottom is up. I'm a kardashian fan!
ReplyDeletePutt Putt golf! :)
DeleteQ: How many shipper fleets can turn a profit with BDI sitting at 750?
ReplyDeleteSD - Straight down, how can tar sands compete with West Tx. oil that was mothballed and kept hush-hush back in the 70's?
ReplyDeleteIf I felt a little more confident about the market, there are a number of stocks have had some pretty good pullbacks and could be bought.
ReplyDeleteThe other factor is when I look back through my spreadsheets, August is the only month where I've lost money on average and have more negative returns than positive, so I consider it my personal worst month. Probably dumb, but maybe meaningful. Either way, being patient is probably not a bad thing.
I've come to the same conclusion, summer is the worst time to buy. This happened a couple of years ago as well.
DeleteELNK - Looks kinda like a standards shakeout. Will that be Chocolate or Strawberry?
ReplyDeleteNATTY - That was a nicely faked rally!!!
ReplyDeleteAnother consistent quarter from NWLI. Trading at 9 times annualized earnings and 56% of book value now.
ReplyDeleteReality is they are still making good profits, even with low rates and the will almost certainly go up as rates rise. Plus, when people see this, they'll give it a higer multiple (or reduced dicsount I could call it). This cycle is longer than usual, but every up cycle they get to book value which would up 80% from here. If it takes 5 years and the book value continues to grow at the current rate, will provide a 20% annualized return. Pretty darn good for something this low risk.
Always the earnings have brought a muted response, not the case this time.
DeleteI sold Kim from the phone at 5.37. She was too chatty for me
ReplyDeleteHave you guys noticed anything odd that compels you to buy today? Do you notice repeated attempts at trying to sucker the dip buyers?
ReplyDeleteTGIBF!
I've got a few stocks that are getting close to that "I don't care what the market does, these stocks are so cheap, they will do fine regardless" point.
DeleteI'm trying my best to make good decisions and not just keep adding, learned my lesson on SVM and since still have not recovered to where I was.
DeleteAgree. Averaging down is always risky (what if I am wrong on this stock and don't know it?), so only should be done in rare situations, especially with commodity stocks where so many things can go wrong.
DeleteI think this is different though than buying in tranches. I think it generally helps to buy 1/4 or 1/2 of your position to start and to use market volatility to get a lower average price.
ROLL - Wow, what a schwing!
ReplyDeleteNWLI - Wonder who posted the market order for 4k shares ($1M)?
ReplyDeleteSomebody's gonna get slapped hard soon, not sure I want a front row seat.
ReplyDeleteWho's calling for a gap up tomorrow? Nobody? Good. Gap up!
ReplyDeleteBy the way bb I was thinking more about the august thing yesterday as I watched leju plummet to the depths of hell from just a week ago and I thought about how much I hate august. Luckily for me today was good but I suspect that won't last. Here's to November!
I think that may be why a lot of traders take vacation in August.
DeleteThe interesting thing for my stocks is that July has been up 13 of 14 years and December is the best with 100% up. I have a personal rule of thumb that if either of these months is down to be very cautious.
Oh, and good news on Russia overnight would certainly be cause for a gap up. Earnings and sales numbers have been good this quarter.
DeleteBack in MONIF @ .69
ReplyDeleteSolid quarter out of AGO tonight and beat on earnings. They increased their reserves for Puerto Rico, but decreased some other ones as things get better. Puerto Rico is the last of the big problem areas, so, assuming they have done this correctly (and their previous experience indicates they do), then profits should roll for the next few years. They still need to get the new business going (it increased this quarter, but needs more), but the operating shareholder equity is $35.31 on a $21.97 stock and they just authorized another $400 million stock buyback which will increase the book value per share when shares are bought below book. So 60% upside to get back to book value and they have often traded above this metric in the past.
ReplyDeleteJeez those are some crazy numbers.
DeleteWonder if Wilbur Ross has recently changed his mind?
DeleteMy best guess is the market is rebalancing itself back toward the reality of earnings. I think they sprinted too far ahead last year and now we're getting solid earnings. I wouldn't be shocked to see this last for a while but no one knows for sure. There are two huge unknowns in my mind:
ReplyDelete(1) China - What if they do have a real estate crash as so many people say they are? My thinking is it won't happen because everyone "knows" its going to crash...plus, down payments are 50% for first time home buyers so the leverage isn't really there. However, you can't dismiss the confidence factor: if people refuse to pay up for homes and just keep waiting for lower prices it can cause a significant slowdown which could spill over into other things. I am directly invested in this so I'm definitely at risk...although I think LEJU will actually benefit from this as everything goes online and as developers rush to offer discounts to get people to buy. The WeChat (i.e., Tencent) partnership is huge in my opinion (read up on WeChat when you get a chance).
(2) Russia - This is in my opinion a lower risk than people think it is but I have no knowledge of it.
It will be interesting to see how it all pans out. I'm definitely more on edge than I've been in a long time.
The old fogie's here think war is coming.
DeleteWow...
ReplyDeleteItaly: -15.6%
Germany: -10.1%
Spain: -10.7%
France: -9.8%
In just one month.
DeleteHII - Positive earnings response.
ReplyDeleteALDW - What are the chances this refiner is sitting smack dab in the middle of an oil-rich region?
ReplyDeleteMCP, remeber this one?
ReplyDeletehttp://seekingalpha.com/article/2398135-poof-there-goes-the-short-thesis-molycorp-receives-400mm-lifeline
Must not be a big deal yet, General Moly didn't jump too??? (as it did last time the word moly was mentioned)
DeleteI saw that but when it opened flat I thought the market just shrugged it's shoulders.
DeleteEnvelope delay distortion reality field? "You first" syndrome? Perhaps not a strict rule excluding banker bailouts, deals like these are in the best interest of whomever ponys up the dinero to get the job done?
DeleteCrash alert?
ReplyDeleteElephant and Rhinoceros = Elephino! :)
DeleteIsreal/Iraq?
DeleteBesides, I'm leaving tomorrow morning for a tourney so whatever it is it will just have to wait for Monday.
DeleteRe AGO,
ReplyDeleteI'm pretty sure Ross sold because the stock was owned in a time-dated fund and he needed to wind things up/raise cash. He is still on the board of directors.
From Seeking Alpha:
ReplyDeleteAssured Guaranty +9.2% after beat and boosted buyback
Q2 operating income of $101M or $0.56 per share vs. $98M and $0.52 one year ago.Share repurchases of $177M or 7.1M shares during quarter, bringing buybacks in H1 to $212M or 8.4M shares. Cumulative buybacks since the start of 2013 have added $3.03 to adjusted book value per share, which rose to $50.82 up from $49.58 at start of year. Last night's close was $21.97.Another $400M of buybacks is authorized by the board.Q2 economic loss development of $23M includes $137M of economic loss development mostly thanks to Puerto Rico, offset by $114M in credits thanks to continued improvements in U.S. housing.Present value of new business production (PVP) of $27M, up 69% from a year ago.Previously: Assured Guaranty beats by $0.03AGO +9.2% premarket
Opened UGAZ near Thursday's close @ 14.95, and closing the position here @ 15.37 (+2.8%).
ReplyDeleteBased on overnight futures activity (DJIA futes down as much as -113, and SPX futes trading in the 1890s), I see we narrowly averted major panic last night. A global correction is still on the table. Japan -3%. Australia/South Korea/India all off >-1%. Today is Friday, and most traders will be reluctant to hold through the weekend.
ReplyDeleteNWLI - I think it's impressive management has been able to keep up the earnings given the low rates. Definitely want back in.
ReplyDeleteThe question here is does Europe a leading indicator and pull the North American stocks down or is Europe just the fear trade and North America pull Europe back up?
ReplyDeleteMight be good to get a stock like DB now that it is near all-time lows and they've done their capital raise.
DB - I'd say that's a good bet, especially if it craters suddenly. Not sure what euro officials are up to, vacation and thus leaving accumulators exposed to Mr. Market?
DeleteHow about the US market is pulling back due to capital flowing into Europe?
AGO - Trying a stink bid @ $22.20 partial position, might have to raise it.
ReplyDeleteNES- Looked at this one really quickly yesterday. Gonna go much lower.
ReplyDeleteI just can't see trucking frack water across the country, onsite treatment instead?
DeleteBLMN - I like this idea a lot but the chart looks like a bear flag to me right now.
ReplyDeleteOn the other hand, in March it did the same kind of thing with the gap up so this could be the same trick in reverse.
DeleteTBT - This one's tempting too...
ReplyDeletePerhaps I'll wait till later today after the nervous Nellies sell the last hour?
BTIG calls AGO the best risk/reward in its coverage universe and have a target of $38.
ReplyDeleteYou can read the report with free registration at btigresearch.com
That works for me, thanks. We haven't dipped under 1900 yet so now hopefully we get at least one more scary day.
DeleteDon't press the comma character instead of the decimal or you'll notice the order amount will be well into the $millions.
ReplyDeleteBought a starter position in DB. Probably 1/3 of what I want, but who knows where the bottom really will be.
ReplyDeleteLots of negative chatter on the stock, but that's why we get good prices. The stock is cheap, has a reasonable dividend, meets the banking capitalization requirements and I have to believe management raised all the capital they need. Business show improve due to a focus on cost cutting and reduced competition in investment banking, plus an improving European economy (hopefully).
We'll see. I think there is still quite a bit of headline risk, but I think at a $45 billion market cap, there is a lot better upside than say a BAC.
Take a look at PFE (Pfizer). Not a sector you generally follow, but it's at the 52-wk low, a DJIA component, and more upside IMO than GILD (Gilead).
DeleteMan, 30 would be a sweat entry. Other than 2 quick spikes below that it's been ideal.
DeleteJust looking at how BAC traded in 2011 perhaps we get a throwback rally and then a final plunge. There are positive divergences in play now with the weekly chart which is often a sign that the internals are changing.
DeleteThat uptrend from the November 2012 lows is still holding for SPX. Although its right at it now. It held in Oct 13, Feb 14, and Apr 14.
ReplyDeleteIt must fail in order to fake out the majority?
DeleteThe market seems to like to that these days.
DeleteIf you look at RSP (equal-weighted SPY), it has slightly broken through it's uptrend. That is because larger caps are starting to outperform, so maybe not a concern, just a market shift, but something to watch.
JCP @ 9.22.
ReplyDeleteMCP - Nicely red and tastes bad, glad we didn't step in it.
ReplyDeleteCheck out the charts of XIN and HGSH…right when the China RE market is "crashing"
ReplyDeleteHGSH - Holy crap man!
DeleteTHRX - Huge short float and on BACML US1 list.
ReplyDeleteOn US1 list yet was downgraded to neutral. Nice job BACML, too busy eating tuna salad sandwiches on the beach. Worthless crap.
DeleteBXE - Everyday turd, while real oilers are knocking it out of the park. I wouldn't know the oilers were doing well today just by watching BXE, look elsewhere.
ReplyDeleteI've got a largecap investor friend, who does very well, who loves PFE and buys it on a regular basis on dips. Maybe it is a good buy here, but the industry is tough in my opinion, and I really have a tough time buying companies with $180 billion market caps as it gets harder and harder for them to move upwards.
ReplyDeleteBID falling out of bed. Not the greatest sign as I've mentioned before this is highly correlated with the overall US market.
ReplyDeleteWas down more than 9%, some kind of internal crap going on or what?
DeleteThe ultimate pairs trade in my opinion:
ReplyDeleteLong Chinese internet plays...secondary ones
Short SPY
My only rationale for this is the level of distrust surrounding Chinese stocks was so astronomical in 2012 that people are still unwilling to purchase them. Many traders are making money in them but the general public got burnt so badly they won't buy them until there's a bubble. I think we get one.
For that matter, long most China secondary plays (ie not the BIDUs etc which have had massive runs but maybe the ones like XIN LEJU/EJ etc)
DeleteCYD is the only one I'd consider, the rest can no longer be trusted. ABAC(OINK) maybe.
DeleteFool me once, I'm not really interested in communist countries b/c any spat = instant splat.
EPAM is bucking the headwinds nicely.
I followed this up. Short SPY at $191.84. Only long I have now is LEJU. Well, other than my miniscule position in ESTE.
DeleteAGO - Did this one just spike well over $23 or is my chart crap?
ReplyDeleteBID - Victim of higher taxes, so goes the headline.
ReplyDeleteLook for strength, we need to know which ones are most favored once the slow motion crash is resolved.
ReplyDeleteLong SDS at $26.41. I believe they call this shorting in the hole so I'm keeping a "short" leash.
ReplyDeleteSnapped my leash. Out at $26.38.
DeleteKeeping SPY short though.
Deletecovered 191.88
DeleteWhoa dodged a bullet on that one. Good to see.
DeleteWhat's amazing to me is BAC shareholders wind up shouldering Countrywide's criminal activity.
ReplyDeleteThese bankers are slick risk takers stealing anything not nailed down.
ROLL - So you guys don't like this one then, right?
ReplyDeleteAugust 7 - "ROLL reported 1Q15 EPS of $0.69, lower than both the Street mean of $0.70 and BofAMLe of $0.77. We continue to believe ROLL is a key beneficiary of the US industrial production recovery."
DeleteGMO - Are they shorting GMO instead of MCP?
ReplyDeleteCPST - Ouchie!
ReplyDeleteI have a buddy of mine that owns 5 different businesses in the Lehigh valley (PA, I went to Lehigh FYI) and he's been killing it on this crazy tax structure they instituted for Allentown called NIZ. They basically are allowing businesses to get massive multi year tax breaks for moving their business into Allentown. He scooped up like 5 buildings there just after it was announced and his property values have skyrocketed. Anyway, he was buying up this company LGP because of a feeling he had that they would take advantage of this somehow. Yesterday the stock was up like 35% on news of a deal that was most likely motivated by the NIZ. I'm wondering if other towns in the US aren't going to institute the same policy.
ReplyDeleteYes, this is a great way to make money!
DeleteMy state will likely do this, our governor is speaking out along these lines as he's afraid military spending cuts are going to hit the state hard.
DC is kinda in a similar boat, US government is consolidating office space and the DC mayor couldn't be happier knowing this office space will finally contribute to the tax base once transferred to public domain.
Like maybe this ties in with a REIT of some sort?
Delete1921 - Better hold this support level.
ReplyDeleteINT - Looks like a bull flag, huh?
ReplyDeleteSPH - Which way does this one go, I vote lower based on farmers won't be growing a large crop of corn and won't need to dry their grain?
I dunno how much this effects propane prices but do recall the propane "shortage" not so long ago?
Europe is dead eh. really?
ReplyDelete"It has not taken much economic growth in Europe for its major container ports to become overwhelmed. The reason is not just growth, though volumes from Asia to Europe are up over 8 percent year-to-date through June, according to Container Trades Statistics. It's the growing struggles ports are facing handling the largest container ships. They can't work them fast enough, making them late for subsequent port calls, a problem that the Port of Rotterdam identified in explaining why it's implementing a series of measures to eliminate congestion"
JCP off @ 9.33.
ReplyDeleteUnless something changes radically, my kids would never want to eat at MCD. They are more into health food than I am.
ReplyDeleteDon't hold your breath for such a radical change as that! Well, nothing surprises me anymore so I shouldn't say that. I kinda think of MCD as representative of the US past, cooking burgers on the charcoal grill in the park or a camping trip. This is probably why I prefer Burger King.
DeleteWhat's really unbelievable is I can claim to have taken someone to the rainbow room who had never been there before, for burgers on the beach baby!
Opening small position in RYTPX (Rydex 2x Inverse SPX) at the close.
ReplyDeleteEven PIR looked healthy, great show!
ReplyDeleteI really like it here.
DeleteOnly because the risk / reward is skewed in your favor. If it fails to rally then its a good time to sell now much below where we are.
DeleteHoly hell look at that bottoming tail in the Nikkei futures.
ReplyDelete