Giovanni di Maggio

Wall Street Breakfast: Must-Know News

Please note that the "¥" sign means Japanese Yen and not Chinese Yuan or RMB which is Chinas currency.

What the SEC Really Accomplished with Its New 'Short-Sell' Rule

I agree with garsonvonah, play with what you have, either money to buy or stock to sell.
Those who rant about gov interference (=regulation) are either silly if they believe a fair market can exist without regulation or they have their own private interest to defend.
The millions of retail investors would have no chance to save their savings from the vultures otherwise.
Regulation is rather still to weak as the rules are not sufficient and don't really get enforced.
Even if one believes that one should be allowed to speculate with borrowed shares, this does not justify naked shorting except for very limited cases (i.e. mm's during a very short period in order to make a market when demand and supply do not match momentarily).
But even "regular" short selling is mostly based on abuse because brokers mostly do not ask the owners of the shares that they "borrow" whether they want to lend their shares. If I own stock X in a margin account (for which I pay interest!) who or what gives the broker the right to "borrow" my stock without even asking me? Forget about paying me for borrowing my property.
It is obviously against my interest to lend my stock (of which I am long because I believe it will go up) to someone who wants to drive it down by shorting it and (not so rarely) afterwards manipulates the market with rumours to make it go down more. If they want to sell short, ok, borrow the stock from a conscient (!) owner who knows that he lends it to a short seller.
This is what I mean when I say there is even too little regulation. Nobody should be allowed to use my long position to short sell without my consent.

And OF COURSE nobody should be allowed to sell stock that they don't own nor even borrowed. This not only "may lead to counterfeiting" as one comment says, this IS counterfeiting because it creates immediately (!) non existing shares (few or many, whatever) of the traded stock.
The stock that is naked short sold does not exist, the shares traded are counterfeited but the buyer does not know this and believes that they bought "real" stock. Indeed their account shows that they own this stock, but in reality it does not exist.

If you pay with a cheque that is not covered either by your money in your account or by a loan or credit margin of your bank, this is called fraud. Paying with a cheque that is not covered is like printing false money. Naked short selling is nothing else. Like a chque or a bank note the share of stock represents money. If you falsify bank notes or commit cheque fraud you go to jail.
Why not if you sell non existing stock?

P/E Ratios Using Reported and Operating Earnings

Strange that the author felt that this needed to be said.
Who ever based his P/E calc on operating earnings instead of net earning?
BTW the difference is not only write-downs but also income tax and some other voices like interest paid or earned.

Estimating KSW at 40% Below Fair Valuation

I may add some information about the comparable competitors of KSW over the last FY.

TT had 34% less revenues and 47% less net income.
FIX had a 28% drop of revenues and 24% less net income.
JCI had 7.4% more revenue and 22% more net income.
KSW had stagnant revenues but 32% more net income than the year before.

None of the competitors has been as successful as KSW increasing the bottom line over the last FY.
Doesn't this mean it merits a higher P/E than the competitors rather than a 35% lower one?

Estimating KSW at 40% Below Fair Valuation

rsinj, you say "The author also appears extremely biased being long the stock. His "estimated fair valuation of $9.72" is nothing more than that - an estimate, one which he has provided absolutely no insight how it was arrived at. "
You don't seem to have read the previous article to which I referred, otherwise how can you say this? Of course I did not repeat the analysis that brought me to the estimated fair value of $9.72 because I could expect that you looked it up before accusing me to give no insight how I arrived there.
The article "The long case for KSW" was published on Jan. 4th (seekingalpha.com/artic...).

Fair value can never be anything else than an estimate because it always bases on assumptions. I have been very clear about my assumptions which were the P/E of comparable competitors and KSW's growth. Trane Inc. (TT) had a ttm P/E of 18.30, Johnson Controls Inc. (JCI) had 17.62 in January while KSW had a ttm P/E of 12.48 , which was 30% lower.
Today TT has 15.84 and JCI has 14.81 while KSW is at 10.03 which is again 35% lower than the average of his two bigger competitors (15.33).
Adding FIX (P/E 16.13) to the mix as proposed by another poster would bring the avg. ttm P/E to 15.6 which does not change much. So KSW is by any means valued at least 35% lower than his comparable competitors.
rsinj seems to argue that the lower valuation is justified because KSW is not growing sufficiently and he refers to the QoQ growth of the mrq.
So the 32% net income growth from 2006 to 2007 is nothing, just because last year's growth has been achieved by increased efficiency notwithstand a very small growth of revenues? I would rather say it is a sign of an able management to increase profits in a slowing economy.
Comparing single quarters does not give a correct idea of how things are going. In this business it is sufficient that a bigger work is finished a week earlier or later and it will be accounted in the previous or the next quarter and the QoQ comparison becomes worthless. To get a correct picture one needs to compare FY results over several years and I think it is very clear how good KSW fares if you look at these results.
Another argument of rsinj was that the growing backlog does not mean anything. While I agree that backlog is not necessarily equal to revenues, I predicted the stagnant 2007 revenues correctly from the backlog numbers and to me this seems to be a confirmation of their usefulness.
Am I biased about the fair value because I am long?
No, it's the other way round.
I am long because my analysis tells me how much this stock is undervalued and I don't need Mr. Warkol to tell me this.
That's why I am not selling at these prices even if KSW drops with the rest of the market.
Call it biased if you want.

Ctrip is Reliable and Ready to Travel

Whether a stock is expensive or not depends on valuation and growth criteria. I agree that eLong is a disaster and CTrip appears bright in comparison. But regarding valuation and growth there is another travel stock that has much better growth and key stats but which the author does not even mention: UTVG.

VALUATION MEASURES CTRP UTVG
Trailing P/E (ttm, intraday): 82.27 18.15
Forward P/E (fye 31-Dec-08): 50.50 7.26
PEG Ratio (5 yr expected): 1.98 0.54
Price/Sales (ttm): 23.99 3.40
Price/Book (mrq): 18.09 8.44
Qtrly Revenue Growth (yoy): 55.00% 751.40%
Qtrly Earnings Growth (yoy): 69.50% 218.60%

Correlation of S&P 500 to Oil Prices

These statistics show whatever you want to see. negative correlation, positive correlation. We discussed this articles among some critical investors and maybe you want to answer to this comment:
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Interesting topic but I don't know what they measured.

Was correlation measured instantaneously? at the end of each trading day (oil up a dollar S&P down a dollar, etc.)? monthly? quarterly?

Even if there was no simultaneous variation over whatever interval they were measuring it is entirely possible that there was correlation with a lag period, e.g., S&P might go down 3 months after a sustained rise in oil price, etc.

The theory behind the graph they showed is terrible; overlaying an independent variable on the dependent variable adds no information at all, yet the eye tends to view the rising oil prices of late as somehow reinforcing the absence of consistent S&P correlation.

Drug companies and less reputable researchers do this sort of thing all the time, designing visuals so as to suggest whatever outcome they deem favorable instead of showing the original data, a practice I used to rail against in my academic days. Why not just superimpose S&P against time and oil price against time? After that basic data is displayed one can get fancier with statistical graphs and the reader will be able to judge for him/herself whether the statistics seem to fit the original data or are a stretch.