Friday, April 22, 2016
4/22/16 Manic Monday
'Manic Monday' started hitting the airwaves in early '86. Not the kind of stuff I normally listened to, but after countless iterations during my daily commute down US 23 to Milan (MI) the Bangles finally converted me. It was only this week that I learned the song was penned by Prince.
We had another perfect pullback on Thursday and Friday, the kind that launches further rallies. My take? We gap up hard on Monday.
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Any bets on whether we see new all-time highs for the DJIA and SPX next week? I believe we will.
ReplyDeleteI don't know about SPX, but the USO chart seems coiled for an upside breakout to clear 3-month highs, above $11.
ReplyDeleteOil goes to $47 this week
Delete"Only 38% of Big Money poll respondents say they are bullish or very bullish about stocks today, down from 55% in last fall’s survey. The spring 2016 poll is one of the least bullish ever. "
ReplyDeleteGoogle "Barron’s Big Money Poll: The Pros Turn Cautious" to get pass the paywall
Plus for Mark:
Delete"Apple (ticker: AAPL), which trades for $106, or less than 12 times expected earnings, is the Big Money crowd’s favorite stock this spring"
If it's a favorite then prob not best thing no?
DeleteI would agree - no-one left to buy.
DeleteBrent - Are you going to try GPS again? Back down to when you first bought it.
ReplyDeleteProbably not. Their last quarter was really bad again, so I think the turnaround is dragging out.
DeleteI bought a retailer in Canada - RET.A - it's cheap too, but has focused on niche's like oversized and pregnant women, so I think has a better chance for a fast turnaround.
In general, I'm torn on retail because many of the stocks have come down a lot and are cheap, but the retail environment is changing fast.
Amazon is destroying everyone. I know you are skeptical of their long term margins but keep in mind they are mostly an exchange matching suppliers with customers. They are going to destroy UPS/ Fedex so I would probably take a huge chunk of the market cap of those two and add it to Amazon. And they are getting huge into warehousing/logistics like a EXR or SSS so think about the potential there as well. And of course cloud storage...
DeleteI do wonder about AMZN longer term as I think a lot of their competitive advantage has been due to stock holders giving them basically free money and cheaper prices due to state tax avoidance. Not that I think they are going away, but I think their stock is way overvalued and their business model will be under a lot more pressure than it has been going forward.
DeleteBut specifically in Canada, AMZN is not nearly as competitive as the US with 7% online market share vs. 15% in the US (even AMZN UK is higher at 10%) and 58 million product listings vs. 260 million in the US. 40% of amazon.ca's sales are still book and whenever I buy electronics, I compare AMZN with BBUY and BBUY is always the same or cheaper with easier return policies.
I agree retail is more risky than it was a few years ago. I also know people up here buy a lot of clothes on-line from companies like gap.ca or nike.ca, etc., but don't really know of anyone who buys clothes from amazon.ca, so I think retail stores (who pretty much all have web sites) are OK for a few years and RET.A has a lot of things I like in a stock.
Ended up selling cs at 15.28 and taking the hit. Was looking at this more over the weekend and realized its at a higher p/b than bac which I would much rather own
ReplyDeleteI was wrong about gapping up hard this morning. Yet it's a positive when viewed against the backdrop of a push to new highs. New highs will require firepower, the kind often amassed by selling under-performing stocks, which is then used to punish shorts who have bet against out-performers.
ReplyDeleteIn other words, I'll take any necessary downside action sooner rather than later. Early downside translates into the potential for greater upside down the road.
DeleteLooks like a necessary pullback is in order for energy stocks. Let's see if it's like the May/June 2009 pullback in the market.
DeletePicked up some UAL at $49.8
ReplyDeleteSorry meant to add...trades at 5.7x EPS, 5.5x FCF. CEO just bought $1 Million of stock at $50. Concerns over rising oil prices and growing capacity but with estimates of mid $50's oil next year they're still expected to earn $8.60 EPS. Also the top 4 airlines own 80% of capacity so I'm thinking they're essentially a cartel at this point and can control pricing and inventory. Baggage / other fees have completely changed this industry.
DeleteDecided to buy back into BOCH (Bank of Commerce Holdings), that bank up in Redding, CA. They bought 5 branches from BAC to a total of 9 now and reduced their funding costs through the transaction. They have been consistently profitable, even through the financial crisis and have had a good ROE compared to most banks in the current environment. They are at about 90% of book value and I expect that their earnings and dividends should be increasing and think the stock will double over the next 2 or 3 years as the streamline business and increase profitability. 90% of book is cheap for a California bank. Most banks in CA are above book value as well.
ReplyDeletePlus, assuming rates rise, which I do think happens, this will help restore better margins.
DeleteBKJ had a wild month. I missed the move on BAC...bummed about it. Oh well.
DeleteFUNC is another one I was looking at. Went $11.50 to $9.00 back to $11.50 this year and missed that.
DeleteBut assuming the bull continues, will be lots of opps.
Jeff Saut kind of funny this morning, looking for a bull breakout, but not excited about buying at this time.
My list of energy stocks shows that the underperforming stocks (BCEI, WTI) are actually being *bought* today, while those that performed very well over the past month are being sold. This kind of matches what Jesse was talking about in his latest letter, when crappy low-volume stocks often get "forgotten" during good up days, and then, on some day when everyone else is flat or down, they shoot up. So based on today's action in BCEI and WTI, I would say that that we are just observing a temporary pause in the energy sector, and traders are already positioning themselves for the next leg up. Eventually, as all energy analysts have predicted, the low-quality stocks will join the rally, which usually starts with the highest-quality stocks moving up first, which is exactly what we have observed so far.
ReplyDeleteA lot of the low quality stocks haven't done much, I think, because of their high levels of debt. If we do see a strong rally in oil though, they should have lots of torque to the upside. I'm tempted to pick at a couple of these, but haven't yet.
DeleteI'm in the same boat as Brent. Really hard to justify valuation of these with oil at 42. At 50 I could see some of these rallying significantly. I like SDRL (very risky) and PBR (less risky). Would love to see PBR fill that gap at $5 but I doubt it.
DeleteHow about you follow a simple strategy: buy any crappy stock in the energy sector if USO rises above $11, making a 4-th higher high since the Feb bottom?
DeleteWTI is already my largest position (I added a lot to my initial position when it was stalled at $2.15-$2.20), but I will probably put all my remaining cash into it if USO clears $11 soon and WTI will still be under $2.50 at that point.
DeletePretty risky stock David, high debt. If oil does turn back down, could be in a lot of trouble.
DeletePlus, look at the bounces last March and last August. They lasted 2-3 months (similar to now) before turning back down. I doubt it happens again, but no way of knowing for sure and you want to manage your risk.
True. That's why if you enter a WTI position now, it would make sense to place a stop just below the last week's lows, say at $2.10. This is what I have done with my whole position.
DeleteLooking at the risk of WTI another way, if it weren't risky (say like HLX), then it would already be at 9-month highs, like HLX. As it is right now, it is still basically at its 2015 lows. So maybe its current price already accounts for that risk?
DeleteDavid - Keep an eye on how REXX trades after the announced transactions today. That will be a great tell if the market is willing to absorb all of the dilution
DeleteMike, I don't get how these transactions work. In the first transaction, somebody agreed to exchange $26.9M worth of notes for 5.2 million shares of common stock, which are now worth $5.7M. Why would someone do that???
DeleteHey david - because the company probably told bond holders they would just declare bankruptcy. They're probably thinking at best they get pennies on the dollar after a long bankruptcy filing or instead they get 0.20 on the dollar and hope they have a little upside.
DeleteWow, that's heavy... Or maybe the company just bullshitted these bondholders about their intentions to declare bankruptcy?
DeleteThat's business.
DeleteA neighbour of mine was trying to get zoning approval for a restaurant/wedding center and the city was balking. So he went through the possible businesses he could put there with the current zoning and one was a toxic waste processing facility, so he told them approve my request or we start processing toxic waste. Amazingly, the government approved it very quickly.
Oh the company most likely was bullshitting but if you're a bondholder and having just gone through the mother of all downturns, do you want to risk that?
DeleteMan I got lucky today. I sold UAL at $49.8 on the morning pop and bought FCX at $10.9. Makes up a little bit for last week's drubbing. I'm considering some WTI and SDRL here as I think oil makes another run up to potentially $47 this week.
ReplyDeleteLong SDRL at $4.025. I'm thinking this thing is a rocket ship based on the last huge move up it made. That seems to me to be pent up demand. Should oil rally more I think this could go up to $6. Also, they are in a tight spot with debt but they were actually EPS / FCF positive last quarter (which I believe was a clean quarter with no write downs) and I think bondholders will extend their debt.
ReplyDeletePicked up WTI at $2.35. Keeping positions small
ReplyDeleteBought more WTI now at 2.36 with a stop at 2.10.
ReplyDeleteGood timing, Mike! :) I didn't see your trade when I placed mine!
ReplyDeleteHey David - See my note below. I changed my mind on it after looking closer at the balance sheet. I know it means nothing in short term but I like some other options better.
DeleteActually I ended up bailing on the WTI after looking at that balance sheet again. Just too much risk. I ended up picking up NM...small chunk at 1.487 avg
ReplyDeleteNM has a net asset value of $10/share. This takes into account the value of their ships less the debt on them, obviously. I don't know how accurate the asset values of their ships are but they should be ale to liquidate some of them to stay in biz until dry bulk rates rise. They have been rising for a few months now but are obviously still very low. I think the risk of them going out of business in the near term is low and its worth the risk here. The chart looks ok as far as what seems like a bottoming process after a huge downturn.
DeleteMike, chart-wise, there is much more risk in NM than in WTI, since the previous low is much farther down...
ReplyDeleteYeah probably. I'm looking to hold this for a little bit so I'm ok with taking an unrealized hit. Position size is only 5% so manageable either way.
DeleteBesides, Mike, if oil goes to 47 this week, then there is a very good chance that WTI zooms...
ReplyDeleteWho the hell really knows where it's going! I just think there's another push higher before we see a broader pullback, but I'm open either way. For all I know, AAPL has horrible earnings and the market drops 4% tomorrow.
DeleteI trusted you on that! I thought you knew!
DeleteLong UGAZ at 26.50
ReplyDeleteSold FCX at $11.34
ReplyDeleteSo, who has been the buyer of energy stocks? Here's one buyer.
ReplyDeletehttp://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/04/20/energy%20share%20buyer.jpg
Long UGAZ at 27.09, and I did not see Mike's entry above! We seem to be in sync today. :)
ReplyDeleteHa crazy!
DeletePlacing a sell limit on UGAZ at 31...
DeleteUS markets flat ahead of tomorrow's Fed rate decision. Elsewhere, EWZ (Brazil) +2.75% tracking a +2% rise in the iBovespa, ASHR (China 'A' Shares) +1.15%, and RSX (Russia) +1.2%.
ReplyDeleteThank you for reminding us about the Fed decision tomorrow! I cancelled all my stops, in case some wild stop running action takes place tomorrow.
DeleteAnother one of those days when the markets are flatish, but my portfolio is pretty much all green.
ReplyDeleteOil prices up + interest rates up + general improving economic sentiment is good for me. Not surprisingly, Consumer staples and utilities having a tough day.
I come across utility stocks which look pretty good once in a while recently, but I think its best to stay far away as an real rise in rates crushes them (and REITS).
Bought back into FCX after hours at $11.45
ReplyDeleteOil ripping after hours at the same time AAPL is dumping. Too funny. That is why guys like Bogle recommend just parking your cash in SPY.
ReplyDeleteI'd still stay away from AAPL. The smart phone market is becoming commoditized and AAPL hasn't really had great innovation in a long time. The big phone last year was a big seller, but that was catchup and is over. People have high expectations from iphone 7 later this year, but really doubt will be anything big enough to justify their triple average smartphone price.
DeletePension funds are moving money from something that has played itself out (AAPL) to something that is just starting to come back into play again (oil). I wonder how oil stocks fare tomorrow... I am pretty sure that this AH jump in oil will be sold in a short order, and the real move will depending on what the Fed says tomorrow...
DeleteI agree David. In fact, I picked up some ERY at $16.72 to hedge some of my oil positions. Will take it off tomorrow regardless.
DeleteBrent - I think $36 cash will come into play at some point for AAPL. They're foolish if they waste it on buybacks.
Who dumped MTL at the close today??? Someone who was disappointed with MTL not going up? A similar drop early in the day was bought in a short order on large volume -- let's see if EOD drop today will be bought tomorrow as well. I still have a decent-size position in MTL...
ReplyDeletePlaced a buy limit order for more MTL at $2.05, in case today's closing price does not get corrected immediately tomorrow...
DeleteTempting to sell UGAZ here after a nice 4% run but my suspicion is this latest move was just a backtest of prior highs. I have been thinking nat gas is in a new bull market for a month or so now so any time I see hourly RSIs under 30 I try to buy, particularly I'm looking for a move to RSI < 30, a bounce, and then a move lower in prices to test the < 30 level again. Each time this has happened has triggered a buy signal for me and it has worked every time over the past 6 weeks so far.
ReplyDeleteTook off most of my positions with these gaps up in oil. Sold FCX and had some PBR which I sold. Sold UGAZ. Sold 1/4 of my SDRL which I'll probably just hold. Going to be really busy today and with the Fed meeting I won't have time to track stuff.
ReplyDeleteHolding NM too which is a tiny position for me.
DeleteGotta wonder if this move up in oil and energy stocks holds in short term given how far they have run in just the past couple of weeks. Gaps up after big moves like this typically are exhaustion gaps.
DeleteLong DWTI at 95.3. tiny position
ReplyDeleteSold at $96.7. Might be stuck with my ERY position. XLE is on fire.
DeleteBought some ERY at $16.4
ReplyDeleteBack in UGAZ at 25.99
ReplyDeleteAveraged down to $16.29 in ERY. Not loving being in this.
ReplyDeleteTripled down to at $16.17 avg. This position is going to end badly for me.
DeleteS3 is 15.55.
DeleteFrom TD - saying overweight energy, but stocks are pricing in$ 60 oil:
ReplyDeleteIt should not be surprising that the first-quarter results should be anything but
impressive. That said, the Canadian TSX Energy sector is up 42% since finding a
bottom on January 20, with stocks pricing in approximately +/- US$60/bbl, compared
with the 24-month forward strip of US$47/bbl WTI. We are reiterating our
Overweight sector stance, but point to sector valuations which now sit near the high-
end of the historical range. The most valuable derivative imbedded in energy equities
today is time value. Therefore, we underscore our continued bias to those companies
with a track record of prudent capital allocation strategies, strong balance sheets,
financial liquidity, a sound hedge book, and a cost structure which can support
reasonable cash flow
through this cycle.
I would think $60 is way to high.
DeleteWho knows anymore. Seems to me they can take oil to whatever price they want it at.
DeleteSold ery at 16.37
ReplyDeleteMan it just seems to me like people are reaching for energy / oil stocks.
ReplyDeleteI bet we see a significant pullback here soon.
DeleteIn energy stocks, that is.
DeletePrior to reading Mike's comments above, I decided to make a sacrifice to Market Gods and sold a small part of my WTI position at $2.50 (it was one of the first lots purchased at $2.19, when I noticed that WTI flattened out above the previous low). Who knows -- maybe the Fed says something stupid and everything comes tumbling down...
ReplyDeleteIncidentally, the buy limit order that I placed on MTL at $2.05 was triggered this morning and MTL has nicely recovered after that. So impatient traders are bailing out on it, while the patient ones (not me, but the ones who keep bidding the price back up) are accumulating. I wonder how it all ends...
ReplyDeleteIf the Fed does not say anything stupid, then WTI chart suggests that it should be at $3 really soon...
ReplyDeleteLooks like the Fed did not say anything stupid and oil spikes to a new 2016 high. My crappy energy stocks (BCEI, WTI) seem to be doing well. So far so good. :)
ReplyDeleteMy sacrifice to Market Gods is working! WTI is still about 1/3 of my portfolio, and it is already above the April 12th spike on a closing basis! Will continue scaling out when it reaches $3...
ReplyDeleteGood to see that sacrificial trading strategies work!
DeleteThe Fed leaves rates unchanged, a decision global investors seem to like. Morning weakness in stocks has given way to optimism in most sectors. DJIA +73 points, EEM (emerging markets) +0.52%, FXI (China 'H' Shares) +0.7%, EWZ (Brazil) +2.38%. VT (total world stock market) +0.17%. Still hoping to see an impulse buy wave this week.
ReplyDeleteSince the sacrifice I made to WTI Gods seems to be working, let's see if a sacrifice to BCEI Gods will work as well: just sold at $4.22 the shares I purchased at $3.55 a while ago. Hopefully, the BCEI Gods will decide to make fun of me at will push BCEI above $5 in a short order. Then I will unload the rest of my BCEI position. :))
ReplyDeleteSo far, so good.
DeleteYes. :) But I am much more interested in WTI at this point, since I have a much larger share of my portfolio in it right now, and I want to unload some of it. But I want to do it above $3. :))
DeleteHopefully FB can smooth over the APPLsauce for the QQQ's.
ReplyDeleteNikkei down a cool thousand
ReplyDeleteJapan's Kuroda 'surprises' overnight by failing to announce further stimulus measures. The Nikkei promptly tanked almost -1000 points from its intraday high. DJIA futures plunged close to -150 points in sympathy.
ReplyDeleteThe reaction this morning? DJIA -26 points, SPX flat, and the Nasdaq is actually green (+0.32%). Global markets have similarly shrugged off the BOJ decision. EEM (emerging markets) -0.57%, FXI (China 'H' Shares) -0.29%, ASHR (China 'A' Shares) -0.59%. Both RSX (Russia) +1.2% and EWZ (Brazil) +1.03% posting solid gains. VT (total world stock market) off just -0.06%.
Its worth considering that perhaps some emerging markets went through their own version of 1929-1932. What they're experiencing now is the beginning of a 5 year bull market.
Deletei’m thinking NM is probably worth a shot..I gave up on it at $1.36 I think but thinking put a small amount in and let it ride. if the baltic dry index returns to 2,000 or so (it has been rising every day for 3 months now) then this will be at $5 and probably paying $0.20 dividends...on a $1.25 basis.
I'd agree with that - the big question I have, because emerging stock markets are commodity-heavy, is whether the over-investment in commodity production has been completely worked through yet. Probably, but not for sure and commodity prices are still much lower than they were.
DeleteBut most markets have gone through a pretty tough bear market the last year or so. SPY avoided one, but pretty much all others - small caps, Canada, Europe, etc. did go through a full bear market.
That is driving a lot of market demand and is why down mornings like this morning get bought so quickly.
Bought some more UGAZ at 23.98 and placed a sell limit at 27.
ReplyDeleteOpened a starter position in NM now at $1.24. The stock is now much closer to the previous bottom, so the "chart risk" is much smaller than what it was two days ago...
ReplyDeleteUS indexes reversing sharply to the downside as we approach the close. DJIA -219 points, SPX -0.96%. EEM (emerging markets) -0.92% and VT (total world stock market) -0.73% following suit. EWZ (Brazil) now negative for the day @ -0.36%, RSX (Russia) still green @ +1.48%. Personally, I'm relieved to see a decent selloff. Nothing moves up in a straight line.
ReplyDeleteSEDG killed me today.
ReplyDeleteIt was down less than 7%! UGAZ was down more than 11% and I am not bitching. :) Did you have a very large position in SEDG?
DeleteNo point in talking to a dead man, dude. Of course, this one has nine lives so we'll probably hear from him tomorrow.
DeleteYes, SEDG is a large position for me. I had actually convinced myself it was finally breaking out!
DeleteLong jdst at 2.1 and vrx at 34.8. Small positions
ReplyDeleteSold vrx
DeleteProbably my bias, but confident when I get home we'll be nicely green...
ReplyDeleteDoubled up on jdst avg is now down to 1.94.
ReplyDeleteBought dgld at 48.96
Why did my energy stocks (BCEI, WTI) turn negative on this small pullback in oil??? Oil is still green for the day, so WTF???
ReplyDeleteMaybe, of course, WTI needs to make another higher low before making a race for $3...
DeleteUGAZ, on the other hand, is behaving nicely and reflected off the bottom trend line on the daily chart. Hit my sell limit at $27 for the shares I purchased at $23.98 yesterday.
ReplyDeleteEnded up taking a sizable hit on JDST and smaller hit on DGLD. Was looking for a day trade and could have sold both at breakeven but was thinking we would get a meltdown at the end of the day for gold. Crazy move in them.
ReplyDeleteDamn! I almost made it to green. -.2%.
ReplyDeleteRyan Detrick >
ReplyDeleteThe usually bullish Apr to Nov timeframe was negative for the first time in six years. The record was 10 in a row in the '50s.
and
When looking at the past 10 years, what’s particularly interesting is that the S&P 500 virtually peaks right at the start of May, before the usual volatility and consolidation during the summer months.
Maybe it means we have a George Costanza Seinfeld Opposite year (if you guys remember that epsidoe) where things happen in the reverse of what is normal.
I took a position in LABD after hours at $43.8. I hate buying after a big up day like today and will probably take some pain on it but I really like the chart. I actually had some heading into the close yesterday but sold after hours for some foolish reason. I think XBI is about to enter another downturn.
ReplyDeleteBack in December I was making a list of stocks to watch this year but I got distracted and didn't buy any of them other than LABD which I sold on the first trading day.
ReplyDeleteList:
BITA - $28 / -12%
GDX - $14 / +84%
TRUP - 9.76 / +28%
LABD - $31.09 / + 41% (had this but couldn't hold it because I was too chicken)
The TRUP pick was a no brainer...wish I had purchased that. People spend gobs of $$ on their pets and they sell pet insurance which is getting more and more popular...
AAPL bottomed at $92 back in August. It's basically right there again.
ReplyDelete