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Brendan O'Boyle

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  • Make 40% A Year With Math And Without Shorting [View article]
    Question for the author here:

    Couldn't you eliminate tail risk by buying puts on the VXX and calls on TLT?

    In the past year VXX has declined from 78 to 33, but you can buy a put expiring a bit over 3 months out for 10% of the value of VXX. So if you had done that 4 times over the past year you would have spent ~$22/share in time value but profited to the tune of $45/share. In other words a back of the envelope calculation says to me that putting $5 at risk out of $100 would have returned $45, approximating your expected 40% return.

    Then buy calls on TLT to hedge your exposure. Or maybe forget buying the TLT calls and instead buy some mixture of Treasuries with 95% of your capital in bonds and 5% in VXX puts.

    Roll the options at the end of the quarter to realize your profit. Any idea how this would look as an implementation of your strategy? You basically are taking profit because the Black-Sholes model does not properly value the time decay in VXX puts.

    It's obvious to see looking at an option table, an OTM put should not be the same price as an OTM call.
    Jun 5 09:47 AM | 1 Like Like |Link to Comment
  • Kinder Morgan: How Feasible Is A GP Buyout? [View article]
    "Again for those people who want the GP bought out, what level of gains are you expecting?"

    I suppose they want a valuation more in-line with the market. The JPM Alerian MLP index is presently yielding about 4.8%. With KMP yielding 7.3% the price would need to rise by 45% to net a 5% distribution yield.

    IMHO this is a pretty compelling demonstration of Kinder's relative undervaluation. The JPM Alerian has not grown distributions any faster than KMP (about 5% per year and this is still KMP's expected growth rate).

    Basically KMP is cheap for the same reason AAPL was cheap a year ago. It has been too successful and too many investors piled in. Now it under-performs and investors get to read weekly attack articles from HedgeEye et. al. But sooner or later all the weak hands get squeezed out and the price goes up again. KMP like AAPL is too big to give huge returns, but going forward they should be pretty good.
    Jun 1 10:45 AM | Likes Like |Link to Comment
  • Kinder Morgan: How Feasible Is A GP Buyout? [View article]
    The issue for KMP is that much of the growth in DCF is going to KMI. So buying out the GP would give KMP more room to grow its distribution in the future.

    I don't really understand the issue here. If you want more dividend growth buy KMI. If you want less growth, but more yield now buy KMR/KMP. But don't buy KMR/KMP and then demand that management make a hybrid by getting rid of the GP.

    Better yet if you want a hybrid of KMI and KMP, just buy some ratio of the two. It's equivalent to what you would get if KMP bought out KMI.
    May 29 08:08 PM | 2 Likes Like |Link to Comment
  • What I Am Doing With My AT&T/DirecTV Shares [View article]
    Good article, I'm also long DTV, but no position in T.

    Just wonder about the timing of your sale. The article didn't discuss it, but I'm unsatisfied with the market price of DTV at $83ish/share relative to the takeover price of $95/share.

    Any comment on the risk/reward of waiting for a better price? Seems to me like the deal is being very heavily discounted, particularly considering that DTV was in the high $70s even before T's bid was announced. I'm not happy with leaving 15% on the table on off-chance that the deal doesn't go through.

    Right now I'm inclined to wait for at least $90/share or the shares of T and cash, whichever comes first.
    May 27 02:41 PM | 1 Like Like |Link to Comment
  • Terra Nitrogen: Paying Less For Dividend Income [View article]
    If you read the latest 10-Q the terms are outlined on pages 6 and 20.

    Beyond $1.045 in quarterly distributions the GP keeps 48.5%. Last year 55% of earnings were left to TNH, while this year it was 58.7%.

    After a quick read of the 10-Q the thing I really don't like is:

    "At March 31, 2014, the General Partner and its affiliates owned 75.3% of our outstanding units. When not more than 25% of our issued and outstanding units are held by non-affiliates of the General Partner, we, at the General Partner’s sole discretion, may call, or assign to the General Partner or its affiliates, our right to acquire all such outstanding units held by non- affiliated persons. If the General Partner elects to acquire all outstanding units, we are required to give at least 30 but not more than 60 days notice of our decision to purchase the outstanding units. The purchase price per unit will be the greater of (1) the average of the previous 20 trading days’ closing prices as of the date five days before the purchase is announced or (2) the highest price paid by the General Partner or any of its affiliates for any unit within the 90 days preceding the date the purchase is announced."

    In other words the GP can buyout TNH at any time if they think the market price is attractive.
    May 24 12:26 PM | 2 Likes Like |Link to Comment
  • DIRECTV beats by $0.15, misses on revenue [View news story]
    I think you have a typo here. $7.86B perhaps?
    May 6 08:09 AM | Likes Like |Link to Comment
  • Twitter's full-year revenue outlook disappoints [View news story]
    Don't be silly, that just means they have growth potential.
    Apr 29 09:28 PM | 1 Like Like |Link to Comment
  • eBay -3% AH on soft Q2 outlook; PayPal healthier than Marketplaces [View news story]
    Maybe they were just feeling patriotic...
    Apr 29 06:23 PM | Likes Like |Link to Comment
  • LinkedIn Is A Falling Knife - Do Not Catch It [View article]
    I am a bit confused as to why you would sell puts on a stock you describe as a falling knife.
    Apr 29 05:42 PM | 3 Likes Like |Link to Comment
  • GE Seeks To Make Big Deal; We Still Like Shares [View article]
    This is a great article and long idea. I think GE could be the next JNJ, a sleeping giant that is finally too cheap to ignore.
    Apr 29 07:45 AM | 2 Likes Like |Link to Comment
  • The Equity Cyclical BEAR Market Of 2014 [View article]
    You cannot have an inverted yield curve when the short-term rate is nearly 0%. Inverted yield curves are caused by bond market investors anticipating interest rate cuts, then they sell-short term securities and buy long-term ones to lock in higher rates.

    Does it follow that we cannot have a recession so long as the Fed maintains ZIRP?

    Not sure that I agree with everything in the article, but I do strongly agree with the author's assertion that the bond market will not be a reliable indicator moving forward.
    Apr 28 06:59 PM | Likes Like |Link to Comment
  • Vodafone - The Price Dip Presents A Great Opportunity For Value Investment [View article]
    I don't think the forward dividend yield is 8.3%, it's more like 5%. Agree with the article VOD is a nice buy on the recent pullback.
    Apr 9 11:04 PM | 2 Likes Like |Link to Comment
  • Short Volatility ETFs: Underperformance, But Not Due To Fundamentals [View article]
    Would it not be preferable to buy puts on VXX to short volatility rather than use an ETF? I don't really see any purpose for the ETF unless you are day-trading and the re-balancing isn't a factor.

    Given the inherent decay of VXX I've always found it is rather surprising that an OTM put costs the same as a call, even for options dated well into the future.
    Apr 8 06:48 PM | Likes Like |Link to Comment
  • Codexis Incorporated: A Strong Biopharma Turnaround Play [View article]
    Thanks for the comment.

    The main reason I see the company as a buy is that I view the chances for success for biopharma as being greater than that of biofuels.

    So I guess I disagreed with the past strategy of betting the farm on biofuels and management has come around out of necessity. This turnaround may take some time, but I think the new strategy has a good chance of success.
    Dec 26 03:02 PM | Likes Like |Link to Comment
  • Year-End 2013: An Average Bull Market Year [View article]
    The tricky part is there is so much variation in the length of a bull market, so five years all by itself doesn't mean too much.

    So I still think the best strategy is to buy well priced stocks (AFL, CVX come to mind) and accumulate for the long term. If you are uncomfortable with the price of the market start shifting into a higher weighting in bonds.

    After this run it can't hurt to be a little cautious, but if the bull continues we could easily still see another 20% return next year.

    Thanks for reading!
    Nov 22 09:26 AM | Likes Like |Link to Comment