http://www.marketwatch.com/story/wall-of-worry-gives-way-to-slope-of-hope-2011-10-28?link=MW_story_popular
'Consider the average recommended equity exposure among a subset of the short-term stock market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Stock Newsletter Sentiment Index, or HSNSI). This average has grown by more than 50 percentage points over the last three weeks.
'A jump of this magnitude in so short a time suggests that the wall of worry has started to crumble. Any continuation of the rally will therefore have to come without the strong support that previously was supplied by market sentiment.
'The urge to jump on the bullish bandwagon has been particularly evident among those market timers who focus on the Nasdaq market. That market is quite susceptible to changes in investor mood, and is therefore a particularly sensitive barometer of sentiment. Believe it or not, the Hulbert Nasdaq Newsletter Sentiment Index (or HNNSI) is now 94 percentage points higher than where it stood at its early October low.'
Cashed out, bros. All positions.
The only person who really cares might be Pillzilla.
ReplyDeleteDamn...am I the only remaining B&H er now?
ReplyDeleteWow! How did you make out? And more importantly, what's next?
ReplyDelete49.25...I'll take it. Off for a bike ride and then off to Sacto. for a tourny. I'll catch you cat's from there. Ciao!
ReplyDeleteCome on 2nd, you're swing trading, not buy and holding, not even close. I could see a buy and hold person selling in 3 or 4 or 5 years once this economic cycle has run, but you are purely speculating on what will happen based on sentiment. Or it would be fine to sell, say 10% or 20% of your portfolio here based on locking in profits and reducing risk, just regular portfolio management.
ReplyDeleteHere's the thing, you never know what is going to happen next in the market. Sure, we've had a great run up and people are bullish, but what if we get another 20% straight up from here? What do you do then?
Also, stocks are still cheap. Sure, we may get a pullback, but they are nowhere close to a long-term sell point. I'm 90% long here and have sold a few as I talked about as they had become fully valued and bought some undervalued ones.
Good luck - I hope you get the pullback you are looking for, but 100% of anything is too risky for me.
By the way, how long was your "buy and hold" anyhow?
ReplyDeleteAnd what is your plan here? Back in 100% equities on a 2% pullback, 5%? Wait at least 6 months or 10% down?
ReplyDeleteWhat if we go up another 5% or 10% - what do you do then?
OK, that's enough from me.
Wish the weather was nice enough here to go for a bike ride like Mark. Think I'll go put gloves on and take the dogs for a walk instead.
2nd_ave, I am glad that you finally gave up blind buy-and-hold! Now, when you decide to get back in, I hope you won't pile into diversified funds but will instead choose companies that have a major internal growth opportunity and for which it is just a matter of time before that growth translates into EPS (such as AUMN, GMO, CSTR, etc.).
ReplyDeleteConsistent with my plan of taking some profits early, so as to reduce my margin debt to 0, I just placed a sell limit at $2.93 for the 900 shares of ONP I purchased today at $2.43.
ReplyDeleteAlso, placed a sell limit order at $3.50 for the 1000 shares of SORL I purchased at $3.00 at some point during the past month.
However, in order to get the "money pump" going, I placed a buy limit order at $21.75 for 200 shares of TBT I sold yesterday at $22.75...
ReplyDelete2nd - Have some scotch and a nice Friday evening!!
ReplyDeleteTOF: here is a thought for you. You are hoping to make a 60% return on CSTR in one year (from $50 to $80), right? What if CSTR instead stays range-bound for a year? Basically your 100% buy-and-hold strategy will give you something between 0 and 60% return.
ReplyDeleteNow consider modifying this strategy by keeping only 75% invested all the time and then selling puts to cover the remaining 25% (and then selling covered calls if the shares are assigned to you). Currently, you can sell a November $50 put for $3. That's a 6% return in 3 weeks, a 270% return annualized. You see my point? If you chose to buy-and-hold a stock that you expect to grow only 60% in a year, then you'll probably make more money by continually selling options on that stock.
2nd_ave -- the above comment applies to you to an even greater extent. When you finally decide to get back into the market, consider selling puts instead. If you have a conservative goal of, say, a 50% return in one year, then it is much easier to achieve it by selling options every months and pocketing the premium.
ReplyDeleteAbsolutely, David. I should put the entire port into CSTR.
ReplyDeletelater mark.
ReplyDeleteby the way, my estimate of an EPS hike due to a price hike missed one thing: the cost increases from the major movie studios. per the conference call, they renewed with 5 major studios (only one not being warner bros). for Paramount they extended through 12/31/14 and in return they gave them 100k shs. at $48/share that is $4.8 Million. If you pro rate that over the next 3 years then it's about $1.6 Million annually. they have an option to renew and get another 100k shs...so lets just double the cost to $3.2 Million annually and assume they pay the same to all 6 studios (including Warner). That would be $20 Million in additional expenses.
So back to my projections if you assume a 20% rise in prices, a 5% loss in customers from higher prices, 10% reduction in costs and 66% fewer charged transactions (by fixing the software to charge customers when dvd is returned), you get a boost to profit margins of 8.2%. Profit margins last quarter were 14% so those would rise to 22%. Profit margins for the 9 months thru 9/30 were 11.7% so those would go to 19.9%.
Now if we back out the above studio costs of $20 Million, divide them by the total revenues of
$1.8 Billion
x 1.20 (price hike)
x .95 (customer loss)
=$2.05 Billion
You get a hit to operating margins of 1%.
So the new margins would be 19%. The trailing 9 months EPS would have been as follows:
$1.324 Billion
x
19%
=$251 Million
Less
$34 Million Int Exp
=$217 Million
Less
39% Taxes
=$132 Million
Divided by
32 Million shs
=$4.14 EPS (vs $2.62) for first 9 months
Again, this is why I think this stock is incredibly cheap. That's a run rate of about $5.6 EPS for an entire year with the new pricing.
15 times $5.6 = $84
Assuming they increase revs by 20% and 5% of customers leave, their income statement should be as follows:
Revs +14% ($1.5 Billion x 14% = $210 Million)
Less
Cost of New Licenses: $20 Million
Less:
Raises Interchange Fees: $48 Million
(they estimated $10-14 per quarter but that they should be able to get those fees lowered and might be able to lower transx by charging when DVDs are returned)
TOTAL:
$210 - $20 - $48 = $142
Now we need to back out overhead and taxes to arrive at net income. This is tricky...just how much overhead is needed to collect 14% more revenues? The transaction volume won't go up..in fact it might go down slightly if customers balk at the higher fees. I'd argue that there is very little overhead because the fixed costs of the kiosks is already embedded in their business, but I want to be conservative. Let's say that it
*65% After Tax = $125Million
following
Paramount negotiated
how do i delete a post?
ReplyDeletemy post should have been:
later mark.
by the way, my estimate of an EPS hike due to a price hike missed one thing: the cost increases from the major movie studios. per the conference call, they renewed with 5 major studios (only one not being warner bros). for Paramount they extended through 12/31/14 and in return they gave them 100k shs. at $48/share that is $4.8 Million. If you pro rate that over the next 3 years then it's about $1.6 Million annually. they have an option to renew and get another 100k shs...so lets just double the cost to $3.2 Million annually and assume they pay the same to all 6 studios (including Warner). That would be $20 Million in additional expenses.
So back to my projections if you assume a 20% rise in prices, a 5% loss in customers from higher prices, 10% reduction in costs and 66% fewer charged transactions (by fixing the software to charge customers when dvd is returned), you get a boost to profit margins of 8.2%. Profit margins last quarter were 14% so those would rise to 22%. Profit margins for the 9 months thru 9/30 were 11.7% so those would go to 19.9%.
Now if we back out the above studio costs of $20 Million, divide them by the total revenues of
$1.8 Billion
x 1.20 (price hike)
x .95 (customer loss)
=$2.05 Billion
You get a hit to operating margins of 1%.
So the new margins would be 19%. The trailing 9 months EPS would have been as follows:
$1.324 Billion
x
19%
=$251 Million
Less
$34 Million Int Exp
=$217 Million
Less
39% Taxes
=$132 Million
Divided by
32 Million shs
=$4.14 EPS (vs $2.62) for first 9 months
Again, this is why I think this stock is incredibly cheap. That's a run rate of about $5.6 EPS for an entire year with the new pricing.
15 times $5.6 = $84
David >>> I will sell at $70 probably if the stock can run up quickl, but I think it can get to $80. I removed options trading from my main accounts because knowing me I could get carried away with it and eff myself. So I refuse to touch options unless they're in my small trading account, which holds maybe $5k.
http://www.screencast.com/t/vEinBd5sJ2Y
ReplyDeleteOne of the Minyan's pointed this out today. I found it interesting. Just in the last few months, the first poke through the 200 day MA usually fails and yes, this time could be different. I just copied the steep blue line off of the recent lows to do a comparison of the angle of ascent.
BB - appreciate your thoughts. I'm in a quandry on T. My cost basis is around $28.62 and today I sold a DEC 30 call for $.57 so that puts me in around $28.10 ish after commision. Of course it could get called away but if it doesn't that gives me a yield of about 6.0%. MHT's has TBT in his long term portfolio so he's thinking yields only go up from here.
As far as the market goes, I'm bearish next year. I've read the bull case and the bear case and I guess the bear case just makes more sense to me.
I looked in everything I had for CSTR analysis and couldn't find a thing. Lot's of stuff on producer's I've never heard of but no CSTR.
CP - the guy with internet TV was busy buying playoff tickets and airfare. As soon as he got that done he took off so I'll have to ask him next week about his TV experience. He was pretty excited today.
ReplyDelete"Absolutely, David. I should put the entire port into CSTR."
ReplyDeleteNo, NO! You should put the entire port into AUMN! :) AUMN is sitting on a major support level and can only move up right now, and when it DOES move up, it will go up 10X rather than 60%, like CSTR.
But if you don't want to reap all this reward, find more conservative stocks and start selling puts on them.
Port > Why not move to VZ? Everyone I know prefers VZ over T given the better service. I would never go with AT&T service so I'm biased. Also, just anecdotal but I tried getting AT&T U-verse installed in my home and it was the biggest freaking debacle ever. They spent 8 hours in my home, screwed it up, then never came back to finish the service after I called several times. They also left their crap at my home and I got billed for it so I had to drive to the local service and spend an hour waiting in line and returning everything.
ReplyDeleteI called Cox and they installed next day with no problems.
ReplyDeleteCSTR - I still like it, even with the new math.
ReplyDeleteWHR - Ouch!
ReplyDeleteReturning to the DT mandate (after a full glass absinthe toasted to 2nd_ave, who covered my arse on CSTR trades over the past 2 days): I think I found a drink with the best quality/price ratio out there! It is New Amsterdam Gin, which I bought at CVS last week for $11!
ReplyDeleteSome prior history: when camping at Lake Tahoe in July, we *smelled* a conifer tree growing near our campsite (you know that wonderful smell, right?). Promptly, we collected a whole bag of its needles, and when we returned home I threw all those needs into a large bottle of vodka. A week later, during our weekly game of bridge, all my friends gave me compliments for the great tasting drink I served them.
Then, a month ago, I was renting a cabin near Yosemite and had a desperate urge to have a few drinks one wone evening. So I went to a local store and, for the first ime in my life, bought some gin (Gordon Dry Gin for $9 in CVS). When I tasted it in the cabin, it felt exactly like my vodka+conifer needles drink. Out of curiosity, I later bought another gin on sale at CVS (New Amsterday Gin), and when I did a blind comparison of the two, I consistently felt that one glass of gin was much smoother than the other one. The smoother glass was the New Amsterdam Gin. Later on, I bought Bombay Dry Gin, and, once again, in a blind tasting experiment, the New Amsterdam Gin tasted much smoother and had the same wonderful taste of conifer needls.
So get some gin tonight and toast to 2nd_ave, who covers our arse on risky trades!
WOW! I stop by for a cup of sugar and expect to see the B&H crowd crowing and I see common sense and the old 2nd back! For awhile there I thought he was truly jail bait.
ReplyDeleteGood on ya brother!
You took a good years worth of profits when it was served up and there is still overhead supply to overcome. VERY SMART.
IF the market continues up (IF) then you can always get back in after the trend reasserts itself. It is NEVER wrong to take profits, especially up to 20% in 17 days.
The mark of a true pro...he knows when to walk away from the card table a winner.
I toast you my friend!
FF
guys - this rebound is eerily similar to last year's rebound and the rebound in 1998...if it follows suit we might damn well be back to 1,370 again for a pause and then higher prices.
ReplyDeleteeither way, its good to know the universe is back to norm...2nd is out of the b&h jail cell. if CSTR gets to $60 or higher I might be joining him. shit i probably should just take my 7% gain over the past 6 weeks and run. God knows I've had multiple chances to trade this mofo and get much better returns. i just will be kicking myself if i do that and wake up to see that they have partnered with AMZN and AMZN agreed to take a 10% stake in the company. given they said a streaming partner is gonna be signed before year end, the chances of that happening are real. so i'll stick with the b&h for now. to me a 3.5 month hold (i bot in mid Sept) is buy and hold.
and david - my choice to stick with CSTR has more to do with time frame than anything. momentum in the biz is hitting a crescendo and they have a major catalyst (streaming partner) sitting right in front of them...so my goal is to be out within a couple of months with a 50% gain. annualized that might just be the same kind of return as AUMN's 5 bagger over 3 years.
ReplyDeletei understand that there are plenty of other opportunities (like RAS at low 3's with an 8% yield...talk about no brainer in hindsight) but i like the risk profile of CSTR...downside of a handful of $$, upside of $20-30...all within a few short months in my opinion.
ReplyDelete"New Amsterdam Gin"
ReplyDeleteNice, thanks for the tip David!
Yep, a run at least to the upper trend line isn't out of the question, I'll be watching to see how 1320ish reacts.