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  • Why Pandora Is Subject To A Further Downward Correction [View article]
    Although I agree with your bearish assessment, and caveat: I'm short Pandora (P), there is a point I disagree with: Apple. The company (APPL) has made it clear they are targeting non-US markets primarily, which means they are not going to be taking market share away from Pandora (at least not yet). Second, Apple's model is very much different than Pandora's, and with the Music Genome Project a key asset of Pandora's, I imagine this might be a reason why Apple has decided not to take on Pandora for now. Finally, the royalty issue is a fight that is Pandora's for now (See recent appeal against BMI ruling). This is an area where Apple doesn't want to muddy itself. Royalties are already 'tabu' at Apple, after long-term negotiations made iTunes a reality. Stepping into the US would seriously cannibalize their iTunes business. Therefore, I think Apple's strategy of focusing outside the US (where Pandora doesn't overlap) is smart because before they eventually turn their sites on the US market, the company wants revenue traction in foreign markets. Should their subscription product become successful and Apple decides to launch in the US, one of two things will happen: 1) They will have to cannibalize their current iTune's business model (something they may not be able to do at this juncture due to contractual obligations regarding agreed royalties that won't work in a subscription model) and 2) With Pandora having already established a massive footprint and brand recognition, and the fact that Pandora is one of the bloatware app's pre-installed on most phones, the play for Apple would be to acquire Pandora, but not at these prices. If Pandora reaches $12, Apple will make a play for the company. Remember, Spotify is the company most threatened by Apple and even though Spotify is private, they have a PE that's almost 2.3x that of Pandora. Acquiring Pandora around $12 to $14 a share would be a significant strategic move that would immediately allow Apple to sidestep the royalty issue since Music Genome doesn't overlap with iTunes, and would be an ideal bolt-on acquisition to expand the iTunes footprint by including the Music Genome Project. Sadly, Spotify isn't public or I'd be hammering it short. However, I remain short Pandora not because of Apple, but because of their continued royalty problems. The company is a couple cents away from breaking even but with the royalty to BMI doubling, if they lose the appeal, it's going to set them back significantly. Nonetheless, their business model has no overlap with that of Apple and the market is certainly rewarding Pandora a high multiple per user, which is puzzling. But again, I am overall bearish on Pandora not because of any threat from Apple, as I just don't see it yet, but because the company's business model may never turn a profit as a stand-alone entity, but as a bolt-on to someone like Apple, or even Microsoft should they want to make an aggressive push into music, or Google or Amazon since all of these companies are looking ahead and planning for a business environment where all forms of entertainment media are streaming and Pandora's subscription model, although losing a couple cents per quarter, could help a larger company like those mentioned build out their music presence such that the small loss per share could easily be absorbed. Bottom line: No threat from Apple or we would have seen it in the stock already. The threat is from within because Pandora, as a stand-alone entity, is not a viable business model and can't keep spending at this rate to attract new subscribers in the US (their primary market), coupled with the BMI case, which I believe to be a test case where should they lose in Appeal, filed on May 12th, then other record companies may come at them hard. However, I don't see merit in BMI's case and my concern, as a short seller of P, is that the case is reversed in Appeal and sent back to the lower courts because of the way the Music Genome Project avoids the direct royalty issue by preventing users from specifically selecting any particular song. BMI is trying to fight on the premise that applies to all music companies, which allow their users to select music. Pandora only allows users to create radio stations and then feeds them music using the Genome Project. Perhaps the big labels will band together and buy Pandora before anyone else does, and this early assault in litigation is an attempt to reduce the PE multiple the labels would have to pay to acquire Pandora, which could hurt their own PE significantly UNLESS they acquire P and put it in a holding company, making the issue of Royalties from the holding company to their artists much easier to manage.
    Jun 15, 2015. 08:49 AM | 2 Likes Like |Link to Comment
  • Exoskeletons Becoming Science Fact With Potential Opportunity For Early Investors [View article]
    Huh? Is it just me or can we file this one under the "What'd He Say" category?
    Mar 20, 2015. 08:23 PM | Likes Like |Link to Comment
  • Exoskeletons Becoming Science Fact With Potential Opportunity For Early Investors [View article]
    A) The fundamentals must be looked at in the same context as a development stage Bio-Pharma company

    B) With DARPA Funding involved, there's an unseen, undisclosed, confidential aspect of this company which even the SEC can't shed light on.

    C) Boston Dynamics is the leader in this field. The fact that they selected EKSO's software for the core component of their system, which basically gives the system the ability to balance, is a tremendous endorsement. Finally, EKSO's stock is trading at this multiple because the market is pricing it at this multiple, not because some random magic genie appeared and decided to price this stock at its present value. The market is the market, and where it decides to price a security is what that security is valued, fundamentals aside.

    D) The stock market is there for a specific function other than for you and I to speculate and make money. It's there so development stage companies can gain access to liquidity to fuel their potential. This is America, the land of opportunity. How does a public company in fact take advantage of this opportunity, by default it "PRINTS STOCK" and issues it to a willing buyer, Mr. Market. There's nothing "criminal", there's no "pump and dump". These are verifiable truths: DARPA, Boston Dynamics, Google and Deployment of Machines under FDA Reg's.

    Add it all up, you've got a "speculative, high risk/huge reward play. Apply fundamentals to 60% of the stocks trading at current levels and everyone's totally drunk from the kool-aid. It's like throwing the Freshmen football team up against last year's Varsity champs and then whining about how small they look on the field and why they're down by 107 points. When you try to "outsmart" those who might be smarter than you, which I would refer to in broader terms as "Mr. Market", there's a huge tendency for the Market to come back and remind you how fallible you are. So the point with this stock is: You're either buy it and forget it, you do nothing, or you short it and then come on these boards and puff your chest with straw hat arguments that don't have any relevance or meaning in the context of the actual article. Blame a company for using the market to print shares and sell them to willing buyers so they can fund continued R&D while also taking money from the Government? Oh My! What should we really blame it for. Perhaps licensing their software to Boston Dynamics was wrong. Or why did Google buy Boston Dynamics in the first place? In fact, since we're being logical here, why did my neighbor mow his lawn so early this morning?
    Mar 20, 2015. 08:20 PM | Likes Like |Link to Comment
  • Private Equity In 2015 - An Eye On The Blackstone Group [View article]
    And if the above clarification was not clear enough, please refer to the ADDITIONAL DISCLOSURE AT THE BOTTOM OF THE ARTICLE:

    "Will be looking to leg into BX over the next month to build a long position, and will also consider other names in the group as mentioned in the article."

    Any more questions?
    Feb 11, 2015. 06:15 AM | 3 Likes Like |Link to Comment
  • Private Equity In 2015 - An Eye On The Blackstone Group [View article]
    To address any confusion, we are bullish on BX because of the valuation. The trade "strategy", which one would be more than familiar with if trading any significant size, is a simple risk control strategy designed to build a position while waiting for the underlying thesis to pan out. As George Soros said "I always go into a position assuming I'm wrong and wait for the market to prove me either way".

    Therefore, legging into a position reduces the potential for loss if the thesis is wrong and the market continues discounting the sector. On the other hand, it establishes a core position in a solid company with incredible management paying a handsome dividend whose discount is a symptom of the sector as a whole and not the company.
    Feb 11, 2015. 06:09 AM | 3 Likes Like |Link to Comment
  • Is The Fed Targeting Another Bubble In Stocks? [View article]
    Easy on the conspiracies for just a brief moment. Consider historical trends of the Fed. Yes it's unfortunate to some a bubble appears to be intentional in stocks, unless you're in the business of profiting from such a bubble. On the other hand, if you're unemployed and keep seeing these numbers of how unemployment is dropping, it must be rather annoying, to say the least.

    But remember, the Fed stays sidelined during campaign and election years. Rate hikes next year would be going against the unspoken agreement for the Fed to avoid any action that may affect political outcomes. Let's assume their data suggests a rate rise is possible now and they proceed with a hike. That would paint the word "dunce" on Yellen's head. And she's certainly anything but. The Fed wouldn't make a controversial decision without a unanimous vote. For a hike that would be considered very controversial, you get the idea... Way too early in her tenure to create discourse of this magnitude, implying she's smarter than everyone else in the room. Let's not forget Yellen was selected as Fed Chairwoman just before the Administration changes. So her tenure is likely to be short lived. Do you expect her to rock the boat during such a short stint or perhaps use this as a stepping stone to a choice Presidency at a top Ivy League?

    A hike today would trigger a reaction from the bond market that would create ripples throughout the global economy. It would hurt stocks and the opposite of creating a "wealth effect" is much more devastating in the short run. Assuming a hike in the near term is unlikely for reasons pertaining to how the market will react, the lack of unanimity, present strength in the USD which could change direction if bond traders move the curve to imply the Fed moved to soon and is therefore threatening the economic recovery; Real or not, perception drives markets.

    With the window therefore closed now for practical reasons, the next window is after the elections and probably after a new Fed is appointed. Therefore, if there is going to be a bubble in stocks in the meantime, PROFIT from it. I don't understand why emotions ever get in the way of common sense. As professional traders, we can profit on rising or falling stocks, we don't engage in conspiratorial talk. The market has every reason to rise right now, and the recent drop followed by a snap back rally strong enough to rip your head off is enough evidence that the bulls are in complete control of the market.

    Trade, don't opine. Opine but don't trade. Never do both. In the end, the objective is to make money, not to care why. And it's true, traders are short-sighted, but that's what keeps us alive. Long-term assumptions are for academics and economists because they can afford to be wrong.

    Oh, let's not forget the other 800lb Gorilla: Saudi Arabia has decided to declare war on US oil by dropping their price to US buyers and raising their price in Europe and elsewhere. What seemed like a punitive response to Russia supporting Assad in Syria, now appears to be nothing short of economic war against US oil. The algo's (i.e. hedge funds) seem programmed to model falling oil prices as negative because it used to imply a slowing economy. They haven't learned how to factor geo-political events into their equations. Trust me, I've tried. Believe what you want, but paying less at the pumps means more money all around. And corporate profits are likely to rise as oil gets cheaper since it affects practically every aspect of the economy.

    The next rate hike is 15 months away at best. Until then, the Fed has enough "reverse Q.E." to perhaps make a difference by unwinding some of their $4 trillion+ holdings, hence removing money from the market. But thanks to Saudi Arabia flooding a drowning market with even more cheap oil, a rate hike today would have little to no effect, appear foolish, ill timed, and likely to be called the dumbest move since the early 80's when we dabbled with monetary theory to bring down double digit inflation during Volker's battle with a resolute bond market determined to push the Fed to the brink. A flat footed Fed at the time, confused and under attack, made a sudden policy shift to monetary theory, which was quickly reversed thankfully.

    It seems to be a choice between the lesser of two evils: Raise rates today and create unexpected ripples or reverse Q.E.? Don't fight the Fed. And if the unemployment rate appears to be a facade, then a rate hike would be even more foolish. When the US was in the deepest trough of this last recession, Chinese demand helped pull us out. Now that the Euro Zone, Asia and MENA appear to be on the brink, US demand will need to pull them out. If this is news to anyone, pick up some history books about monetary policy. Or just read Soros.
    Nov 13, 2014. 01:31 PM | 7 Likes Like |Link to Comment
  • Stocks and dollar higher, bonds and gold lower following jobs number [View news story]
    I felt it was important to intercede here after reading these comments for too long and sitting on the sidelines....Unless you're tied into regulatory leaks, contacts on the Hill, or advanced modeling capabilities, any type of trade ahead of these numbers is, as you say, nothing short of a pure "gamble". If you are trading the markets to make money, gambling should be left for the casinos. If you have a penchant for gambling, and like taking these types of directional bets on key headline figures, short of any of the aforementioned sources of "color", save your money and have some fun in Vegas. 8 out of 10 times, the market will adjust ahead of the numbers because there are hedge funds out there (first hand experience), that can model the anticipated numbers with incredible accuracy, even anticipate the size and direction of future revisions.

    I'm only saying this as a gentle reminder that "gambling" is not meant for the market. Anyone who thinks trading stocks is gambling is part of the herd that voluntarily walks into the slaughterhouse.

    Even if as another member suggested "the jobs number will be revised down next month", not only is this irrelevant to your immediate trade, but it's another wild speculation. I'm not blind to the reality of many jobless friends and entire communities suffering from the current jobless recovery, but the reality is politicians can and will massage numbers as they please.

    Especially this administration, which is heavily following the dictum of "Behavioral Finance Theory". The "perception" of a recovery will, hopefully, manifest a recovery. In 2010, the Nobel Prize in Economics was given to 2 economists for their work on "Behavioral Finance". This was perhaps the first time in history a Nobel was awarded for entirely unoriginal and stale research. As a Senior in high school, I read "Alchemy of Finance" by George Soros, in which he presented his "Theory of Reflexivity". This theory, although articulated in the classic Soros dialogue (i.e overly complex and difficult to follow), was none other than Behavior Finance. At the core is herd behavior. When the Obama administration decided to gradually reduce employment taxes so paychecks showed a slight but consistent increase month over month, it had the same financial cost as the 2 tax rebate checks that the Bush II administration sent out during the recession following 9/11.

    Watching with horror as most recipients chose to either save this money or use it to pay down credit card debt, resulting in a net zero effect on the economy in terms of any stimulus, this current administration took a different approach. By gradually increasing the size of paychecks through payroll deduction decreases, the theory was that it would present a sense of increasing incomes, thus stimulating spending, which is why this current recovery is "demand driven" as we and many others have stated time and again. The tax checks were the equivalent of shooting blanks. The gradual reduction in payroll taxes, although very close in cost, succeeded in stimulating demand. A sense of rising incomes makes a person feel they have a brighter future ahead and more discretionary income to spend. Rather than saving the slight month to month increases in their incomes, workers instead came out of their shelters and began buying again, after a very long "tightening of the belt". And American's will spend rather vicariously after having been frugal for a lengthy period of time. I know I do. To politically validate this approach to stimulus, since it had never been attempted before, the Nobel Prize in Economics was usurped for the sake of giving this administration political and economic support. Policies aimed at stimulating demand, although unorthodox, had a much more significant and measurable effect than sending out expensive refund checks. Either the previous administration didn't think this through, or they ignored any dissent from economic advisers who were obviously in the minority. Undergraduate level economic students can understand the risks of recipients choosing to deposit tax checks in their savings accounts or even worse, use the money to pay down credit card debt, if the intention was to stimulate spending. Not only did this have a net zero effect on spending and demand, but it cost the government a lot of money, and not just once, but twice!

    But who would dare give a Nobel Prize in Economics to a hedge fund wizard that is infamous for having "broken the Bank of England"? Pigs would first learn to fly in space before such a thing. Nonetheless, this administration was able to usurp the cover afforded by the Nobel Prize to implement their policies designed to stimulate demand. It worked, is working and we are undergoing a demand led recovery. Jobs will soon follow in much greater velocity, but not until uncertainties in east Asia and Europe are brought under control. In the meantime, as history has shown, America is leading the global recovery, and will continue to do so. When America's economy was on the brink, it was extreme pressure on the Chinese to increase the value of the Yuan that helped shrink the trade imbalance enough to make American products competitive, even if just slightly. As America's recovery continues, you can almost be certain that the Yuan will be allowed to continue falling as China needs to sustain growth in the high single digits just to avoid a recession. With their current trend of labor migration from the poorer, inner cities to prospering coastal economic zones, millions of rural workers from inland cities are seeking and expecting to share in the economic rise of China. The Politburo is well aware of this and have no doubt there will be civil unrest if they fail to deliver. China did what it could to support a US recovery because the G20 knows that unless the US economy recovered, a global recession would continue.

    Back to the point at hand, politicians will and do influence the headlines numbers knowing that revisions later are not monitored as closely as the headlines are.

    If you must "gamble", then do so on the revision, not on the headline. The headline can be and is manipulated, depending on which input variables are emphasized and which variables are weighted less. With an administration who has shown their hand towards the fundamental precepts of Behavioral Finance, the risk will always be in the direction of favorable headlines with revisions down the road. This is nothing more than psychological manipulation of perception, which makes people believe better times are just around the corner, which triggers an impulse to spend a little more, take on a little more debt, etc.. and when this is extrapolated over the monumental size of the US economy as a whole, the effect (hopefully), is to stimulate more spending and thus manifest the recovery that people are hoping for. Thus far, even though one can say that job recovery is lagging, the policy has worked as far as stimulating demand. Just have a look at our SA article regarding Steel and Parcel Delivery companies like FedEx (http://bit.ly/1s0ND62) or (http://bit.ly/1s0NBeh)

    This is the basic precept of Behavioral Finance and if there's any doubt that this present administration has a strong economic policy designed around BF, then I suggest picking up some books on the matter and comparing what you learn with the administrations track record.

    Speaking only as a hedge fund manager, unless we can model as well as the Labor Department, which means knowing how each input variable will be weighted, we'll either revert to the directional trend over the past year regarding the headline number, or we'll avoid taking on risk ahead of the number and then trade aggressively immediately after its release. Since as far back as I can remember, and I began my career on the Street at 17 when I obtained my Series 7, every time the headline jobs number is released, there is an immediate knee-jerk reaction for the first few minutes which is then aggressively reversed. It's been like picking fruit up off the ground, not just the low hanging fruit. Wait for the release and fade the knee-jerk initial move.

    I am not criticizing anyone, just trying to share some painstakingly gained insight from a life dedicated to understanding market behavior, micro-structure, translating Soros' "Theory of Reflexivity" into what is today know as "Behavioral Finance" and hoping that fellow SA readers can benefit at the very least from a trader who has literally thought of nothing else than market behavior since high school. After undergraduate and graduate school, with long stints on Wall Street in between and after, market behavior has always been my center of attention, even my later education was based on further expanding this knowledge. Market's are not rational. The headline numbers are mostly irrelevant. It's the herd and the reaction that follows which is important if ones goal is profit.

    Forgive the lengthy interruption, but I've been reading about this on so many forums within SA that I finally had to "get it off my chest".

    I hope this helps. If not, I am in no way attempting to criticize anyone. Just one "Hedgie" expressing views learned over many years. But the one important point I'd like to circle back to is: The concept of "gambling" as applied to the markets is a dangerous and very slipper slope. Whether it was meant literally or just figuratively, one must be vigilant when it comes to making sure this doesn't creep into your mindset and approach to trading. If one should ever feel like "taking a gamble" on headline numbers, just because your neighborhood and friends are not employed, just back away and wait until the numbers are released, then observe the knee-jerk reaction,wait a few minutes and immediately fade it. Your odds of success shoot up dramatically, and you are no longer gambling, but rather employing a proven strategy and long used tactic by professional traders and massive hedge funds alike. That is if your ultimate strategy involves increasing your probability of success and desire to make a profit rather than be "right" on a gamble. That thrill should be exhausted in the Sports Book or at the tables in a casino, not behind your trading desk.

    Good Trading.
    Oct 4, 2014. 02:43 PM | 1 Like Like |Link to Comment
  • Global Macro Trade Alert: The Long Case For Vesta Wind Systems [View article]
    Although both "migueladolfo's" question and "afer's" response are valid in their own right, there is another important factor, which is earnings velocity and the continued expansion in the company's global footprint. Although as afer's pointed out, the "scores" are impressive, the numbers are not necessarily mediocre. Financials are always "relative". In this case, when starting from below 0, and rising, even a small positive rise is significant enough for a 600% rally in the stock, but if observed in a box, then the numbers are mediocre. But one must ask: what was the cause of mediocrity in a company that leads this sector? And are those problems behind it? The case here involves China and the problems associated from their behavior. Which from our research, have dissipated if not altogether eliminated.

    Even with a 600% bounce from the lows, the company is still, in this author's view, deeply undervalued. Continued advances in their technology coupled with their continued international growth is creating scale, which in turn reduces the price of their products going forward, increasing sales velocity and continuing the upward spiral.

    If you believe in Wind, then this is the #1 company in the world. Their flurry of press releases announcing new installations in more and more countries is resulting in an installed user base that becomes entrenched. A customer is unlikely to install Vestas only to rip them out for GE or another supplier. The service contracts associated with each sale, future upgrades and ability to expand the size of the installation are all incremental revenue streams that increase the future value of any new contract. In other words, the present trend of improved technology, expansion of their international footprint, increase in installed and operating products, are what we refer to as "filling the pipeline" out of which will come increased incremental revenue. So although the numbers look relatively benign at present, with each new installation, the potential for down line sales and service revenues are powerful earnings multipliers.

    Every new install increases this multiplier, resulting in an exponential increase in earnings velocity. Any investment today is for this outlook. The caveat is oil prices. The delicate balance between Russian tensions and the market's preparation for Persian oil to hit the market seems to be holding prices steady. As proof of a global recovery continues to come in with no talk of resistance from the Fed, then it's highly unlikely for crude prices to fall below a price point where alternative energy becomes uneconomical.
    Oct 3, 2014. 06:57 PM | Likes Like |Link to Comment
  • The Long Case For AK Steel Holding Corp. [View article]
    Glad to have answered your question to your satisfaction. I will always do my best to present our color on a stock we follow and not hold anything back. Even if we later find ourselves to be wrong. As George Soros said "I go into a trade assuming I'm wrong, then look for reasons to prove that I'm wrong. Absent finding any reason, I will stay in the position, if not increase it." We couldn't agree more.

    And the not-so-subtle bounce over the past 2 days, taking the stock back above the 200-day SMA, which was why the tabloid equivalent news site published an alarmist, but nonsensical article suggesting an intraday violation of this moving average was reason to panic, hammers home another important tactical reminder: Any "key violation" of a technical level, whether a support zone or a major MA, must be maintained for at least 3 trading days. A mere intraday violation and close is not, by any stretch of the imagination, a valid technical signal. The violation must hold for a minimum period of time before it is validated, and this is well documented in any semi-respectable book on the matter. Moreover, if technical analysis is the only approach one takes to trading, then it's a symptom of either laziness, stupidity, ignorance or all of the above. Victor Neidorhoffer, a well-known fund manager that blew up his fund twice from the exact same trade but 2 years apart, first put forth this assumption in his book "Education of a Speculator". This was later and more recently followed by the book, "Evidence Based Technical Analysis". The common denominator in both books is "any technical move must be quantifiable and proved non-random by statistical and empirical evidence, and therefore repeatable under equal conditions as well as predictable with a certain degree of accuracy".

    Ridiculous and perverse analysis, from a publicly traded tabloid website which covers stocks, to the contrary is shameful at best and manipulative discourse at worst. Just stick to your rational and methodical judgment and analytical understanding, remember to continue expanding your educational horizon and in the long-run, although we're all dead, you'll at least die rich.

    Unlike over-leveraged daytrader's at Proprietary Trading shops who plan their trading strategies 1 hour before the open, who then throw their plan out the window within 45 minutes after the open and become reactionary to market noise throughout the day, eventually giving in to just following the head trader's coat-tails in hopes of closing below their loss-limit for the day, never realizing that their strategy had shifted from making money to not losing more than they are permitted in a single day; ultimately followed by happy hour after the close; informed investors with an appreciation for and ability to understand market color are those who will produce positive quarters consistently. Without a general "global macro theme" to guide you and the tactical trading skills to support the general theme, a trader is flying blind. Regardless of whether they're sitting at a desk on a huge trading floor trading firm capital, they are nothing more than modern variations of bucket shop saps being taken to the cleaners. As their deposit capital is whittled down, they're either asked to reload or leave. If you're spending time researching, and your presence here is proof positive of this, then you're already miles ahead of those on Proprietary trading floors with too much leverage, miniscule to non-existing paychecks, and a firm who is more than likely trading against their traders under the guise of "hedging the firm's overall exposure". I've seen it up close and personal and ended several professional relationships when exposed to this sad truth. If you trade fairly well, the "black box" is not targeted to fade your trades. If you trade poorly, the risk management system will take counter-positions to your trades just as the house takes bets from their customers. Sad, but true. Regardless of how it is justified, the act of trading against your own traders using a black box because they are losing money is borderline criminal and absolutely unethical. Rather than firing the trader, they'd rather earn from trading fees while hedging their losses and statistically profiting from taking the other side. I mention this only because these are the same traders who scan and react to headlines from these worthless web sites. From experience, I'm sure many saw this headline and immediately began to short the stock, never realizing they were shorting into a selling exhaustion and are now providing the catalyst for continued upside in the stock.

    Knowledge is king. What happened over the past 2 days since we printed the response to your question? The market action speaks for itself. And when correlations spike to 1.0, it's an indication of some panic in the market, so a massive counter-directional rally on Friday was not the least bit surprising and those that were buying while there was blood on the streets, thus fading the herd and buying risk at a discount were able to close their books for the weekend after netting substantial gains. As we mentioned, "Contrary to the herd keeps a trader healthy, wealthy and wise."

    Cheers.
    Oct 3, 2014. 06:28 PM | Likes Like |Link to Comment
  • The Long Case For AK Steel Holding Corp. [View article]
    We have a correlation spike across the board, and it appears many stocks have become entwined in the nasty correlation entanglement, when correlations approach 1.0 and everything ebbs and flows with the general tide.

    Under these conditions, the herd (a collective of algo's, main street, and over-leveraged day traders) will present those with a more "colored" view of the markets with tremendous opportunities. As a fund manager, cash is always available to purchase stock, and as an article we published recently on InvestmentCapitalist.com suggested, raising cash levels ahead of the month of October in anticipation for a general and perhaps sharp stock market decline would be prudent.

    The Street (dot) com released an article saying the 200-day Simple Moving Average had been breached and this was cause for a panic and reason to dump the stock. If this type of reporting is not a perfect example of why The Street (dot) com is written for Main Street by Main Street and for intelligent investors, then nothing else would convince you to avoid that trash.

    For the company to offer stock to clear the transaction so they didn't have to keep the short term bridge a day longer is fundamentally great news. Moreover, if you scan the chat sights or forums, you'll hear the "herd" whining about the dilution, then whining more when the underwriters picked up the over-allotment because of the interest in the offering.

    What Main Street and the Herd are oblivious too is the fact that company shares are being diluted everyday across the board in a majority of stocks. Whether through stock option exercises, treasury transactions to raise capital, convertible bonds collapsing, warrant exercises, etc.., share #'s will and do fluctuate. If a company the size of AK Steel is able to move 30+mm shares to raise $265mm net for a $700mm+ acquisition, while the company is valued at over $1B BEFORE the acquisition of the Severstral assets are factored in, which from our previous work we estimate to have a replacement value of $5B, a number confirmed by the company, not to mention the cash that was included in the transaction which made it far "less" expensive than it appeared since roughly $300mm was included in the price as cash or equivalents, the very simple answer to your question of what the author thinks is "if you are an active position trader such as we are and trade around a core position, then this price point is a technical slam-dunk and a longer term fundamental no-brainer". But the cherry on top is when a gossip column equivalent as previously mentioned announces "panic panic, we've broken a major simple moving average". At this price point, with the company's massive net-loss carryovers, the fact that an entire quarter hasn't even yet passed, and we haven't even begun to see the immediate accretion the CEO signed away on, combined with the various industries which AK Steel sells to being on a major upswing, again, the reaction should be obvious. But outside of suggesting what anyone other than this author should do since we only know our own risk profile, I can say openly and publicly and have the records if ever asked, that we were buying at several points today, ranging from $7.85 to $7.45. Resulting in an almost tripling of our position. Having taken some profits at $11.62, we had the room, and have used this correlation spike across the market as the precursor to load up on an oppty that doesn't come around too often. Negative talk "after the fact" is to create page views. Bullish talk while in a cascade is often referred to as insanity. If I'm not usually called insane when putting on a trade, then I get worried.

    The ultimate and most important axiom in trading is to do fade the crowd, not follow the herd. The fundamentals of the transaction are all over the net and have been reviewed here in great depth. The technical picture requires the viewer to simply "look left". A basic strategy we learned early from our mentors, to see where the chart may trigger inflection points or major pivots. On both fronts, this is why we literally tripled our position size and may continue to increase it. We also have our own proprietary sequential counter similar to that which was published in the 80's by a very famous technician although it's dangerous to publicly mention this person at risk of having his son call you and threaten litigation. But our own sequential countdown has triggered a rare but fairly accurate buy, designed to be a contrarian indicator that looks forward, as opposed to calculating by looking back.

    I wouldn't be surprised if the rest of our bids were hit at various prices and we ended up with a position size 4 times as large as what it was yesterday. For 2 simple reasons: we expected this cascade across the board as the vacation month of August came to an end and hedge funds returned to do their normal thing, which involves a lot of short selling, and the stigma of an October decline resulting in a general psychological exit by the herd which manifests that which they feared. Behavioral Finance at its finest.

    In the interest of prudence, we have never hesitated to admit being wrong in a trade, and this is not a cry to salvage a publicly released opinion. On the contrary, in the spirit of trading around the position, this is an opportunity for US to heavily lay into this position and the just released bearish commentary by a tabloid equivalent website is an actual confirmation signal. We've created statistical data that shows these tabloid type articles written to chase the news and thus pop up for page views since there will be an increase in those searching for news on this stock, correlates with a significant move in the opposite direction shortly thereafter, often within a day or two.

    Short of providing direct guidance, I can only tell you what this author is doing, and can do so publicly because we have the data to confirm if asked. We are leaning hard into the stock, with bids and market swipes of the offer, resulting in a several fold increase in the core position. Which also means that we'll be shaving the size back down when the stock exhibits mean reversion, which should take the price back to $10 at least before some back and fill work to find short-term equilibrium. Long term view has not changed: We see this stock at $12 by the end of this year, and as high as $18 to $21 next year, as long as the velocity of automotive sales remains somewhat constant. The overly optimistic scenario would include demand from housing to continue picking up, and the sudden interest from aerospace for the newer, lighter steel as an alternative to a much more expensive aluminum equivalent.

    The correlation in this particular sector has a great deal to do with fears of China being on the brink of an economic swan dive. The 800lb Gorilla in the room is AK Steel doesn't do much, if any, exporting of their product. Last but not least, a tactical reminder: Contrary to the herd keeps a trader healthy, wealthy and wise.
    Oct 1, 2014. 02:29 PM | Likes Like |Link to Comment
  • Gilead Will Continue To Rise [View article]
    For a more in depth analysis: http://bit.ly/1lYbXVl
    Sep 11, 2014. 12:38 PM | 1 Like Like |Link to Comment
  • The Long Case For AK Steel Holding Corp. [View article]
    As predictable as ever, stock pressed to move the offering at $9. $AKS Gaps up on the news, demand was as predicted. Good price on the debt offering as well.
    Sep 11, 2014. 12:15 PM | Likes Like |Link to Comment
  • Global Macro Update On Financial Markets - Through Chaos Comes Order [View article]
    Parsia;

    I'm glad you see the point. There is a sinister reason behind these abstract, impossible to price derivative trusts which are marked-to-market on a daily basis while throughout the day, the leverage attracts daytraders like flies on cow dung. All the while, algo's spend most of the trading day ripping already leveraged proprietary traders with a pathological penchant for gambling to shreds.

    Anytime I see a "new" derivative based ETF whose only asset is technically an inverse-swap, with major leverage thrown in, low volume and lots of volatility, I look at the underlying and apply reverse deduction to better understand the real macro picture. As for trading these insect traps, I'd rather be the house.
    Sep 10, 2014. 12:34 AM | Likes Like |Link to Comment
  • Pacific Coast Oil Trust And Measure P [View article]
    Why bother when there are no-brainer's like (CIM) out there?
    Sep 10, 2014. 12:13 AM | Likes Like |Link to Comment
  • RadioShack bankruptcy imminent, Wedbush says [View news story]
    When I hear "Radio Shack", I think "AM/FM and CD's", when we're in spread spectrum HD offering several variations of the same station and instant hook up with my massive music collection on my phone, which can now dump right into my car's multimedia system or a built-in USB port for my flash drive.

    When I think Best Buy, I think, "Toys R Us" for grown-ups with a Smartphone App which makes it all the more fun. "Radio Shack" is a horrible brand for the 21st century, as much as Best Buy is a misnomer. I haven't found a "Best Buy" for any product in Best Buy since 1998. Radio Shack might live if they took their model and made it online only. Great brand name recognition for those seeking hard to find replacement parts for gadgets. Add an app to snap a picture of the spare part you need and Radio Shack finds it and ships it out. What else does anyone go there for other than replacement coaxial cable heads or the rare wiring, all of which have margins that are razor thin? That's their strong suit and that's what they should play to. Stop trying to sell high end electronics and radio controlled cars and calculators. Besides, isn't the franchise model dead for electronic stores? I was under the impression Amazon made sure of that a long time ago.

    Into BK, restructure, re-brand and out comes "Born Again Shack" with an app that recognizes any part with a simple photo taken from a smart phone. At least until the 3D printer becomes as ubiquitous as the fax machine (itself quickly becoming redundant and a waste of trees when there's scan to email direct).

    Anyone familiar with Joseph Schumpeter's "Creative Destruction" theory? Even Netflix won't stand the might of HBOGO + Amazon Instant Video. Intel once ruled Memory. Anyone remember Xerox? Or DEC? How about Alcatel/Lucent? Motorola Wireless became a throw-away for Google of all companies, who bought them only for their patent portfolio and threw the rest away as if it was left over casserole. For the older generation: RCA anyone? Polaroid? If you think the business model is threatened, it probably is. If there's a strong chance it's broken, it probably is. If the market shorts the stock to the ground, it's probably because it's a thermal short. And out of the ashes will rise a consumer-centric, agile, business model without any legacy ball & chain to assure it's death knell.

    Circuit City was the tip of the iceberg. On the bright side, if you can, there are the deeply discounted bonds to accumulate going into BK and making a nice chunk of change if you have the capital and the patience.
    Sep 10, 2014. 12:09 AM | 1 Like Like |Link to Comment
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