Tony Kau

Tony Kau
Contributor since: 2011
should have closed my previous post with <end sarcasm> lol
Those evil HNWI... making money while the rest of us are unemployed... they must have put their money to work in the stock market which has, coincidentally, risen over that same time period. I'd like to know what HNWI wealth did during 2008...
Fair enough, I believe an average trader looking for exposure on this play wouldn't do more than 10 contracts which you can almost always buy all of on the ask (and vice versa), and slippage wasn't unreasonable.
My stock-only trend exhaustion fund has a short position on JCI, which I explained in the disclosure that apparently wasn't published by the editing staff. But, touche. :)
You could just as easily let the short legs expire if they're still OTM instead of actually rolling them. Especially with transaction costs, that's the way to go. If you're in the money on the short leg at any point, I would recommend exiting the whole position early to capture that windfall gain.
Thanks, 475F. Another sign pointing to a time to buy!
I agree that you shouldn't get in the way of a herd movement - they're dangerous and can certainly run you over even if you're backed by the fundamentals. I would even go so far as to say that no stock trades according to rational fundamental criteria, because if that were the case, a stock's price would only change following material news affecting profitability and growth of the company.
However, I believe that a company's valuation is the center of gravity around which these pricing gyrations occur. Supply/demand, psychology, trends, rumors, popularity, sentiment, pain/greed are all part of those extraneous movements. However, in the long run, prices tend to return to true valuation levels.
I wouldn't short LNKD now either - too dangerous. What I normally do, though, is to take a company that's significantly over- or under-priced and rely on my Trend Exhaustion App ( ) to make an educated entry for the best chance of buying low and selling high.
HP's current dividend yield is 0.89%. Many tech companies (even huge ones) choose not to dole out a dividend and instead, reinvest the money in their business. To me, it's a sign that they have opportunities with positive NPV. Companies like MSFT, with a 2.65% div yield, are basically cash machines - you can't expect a lot of growth, but their model is highly profitable.
Historically, HPQ has had a dividend for the last 24 years, and during the first half, they were steadily increasing prior to the tech bubble in '99. The dividend has stayed at $0.08 for the last 13 years through a price range of $12 to $75
I would agree that LNKD would make a great short candidate (see my valuation, but right now we're dealing with significant supply/demand issues.
I like the level of detail. I took a broader approach and arrived at almost exactly the same price.
Yes, those are some significant expectations. I came at this from a different angle, valuing the stock, without considering its current price.
5yr Growth is a consensus number, yes (source: Yahoo Finance). I'm certainly no expert on commodities but I do believe in the facts of supply and demand. We're seeing this dip now, which, I believe, is a technical move (less buyers, more profit-takers) not a long-term fundamental trend.
I believe Mr. Levis is suggesting that if you buy the $15 call for $4, and the stock drops to $10, your max loss is capped at the $4 instead of $8.50 if you bought the stock. Options are most often used as leverage, so you're right that it has a much greater percentage impact than buying the stock. However, for identical exposure, you allocate a smaller percentage of your trading capital to that idea when you buy the call instead of the stock. You must allocate options different than stock - it behaves like a completely different animal.
The dip is the 12% drop down from $81 on plunging oil prices.
Thanks for prompting me to explain this, Steve. You're right. There is no data for 2014, but as with most projections, I took past data and results and combined it (conservatively) with future expectations. There is a consensus long-term growth rate available and, I would argue, one of the most consistent track records of profitability in the universe of publicly traded equities. Only time will tell, but Big Oil was one of the easiest models to put together because of the consistency we've seen in their history.
I like the list - there absolutely are deals out there right now. One of my favorites is MSFT, my full writeup is here:
I remember recently recommending RIMM as well.
I agree that budgets have tightened in the last 2 years, but we're starting to see expansion (hiring, spending, etc.) on a macro scale.
As a personal consumer of their products (as I type this on my Logitech keyboard and click "Reply" with my Logitech mouse), I very much appreciate the quality and reliability of their products. I've used off-brand peripherals in the past, including hardware distributed with a retail PC, and I have to say that nothing beats Logitech equipment.
And they really do have products at all price points. My cordless "Wave" KB/mouse combo was only $60, and it's worked flawlessly and comfortably for about 3 years now. Now I sound like a fan-boy... thanks, Ray... :-P
That's a great point - we don't know until it happens. But by then it's too late to capitalize on it. Even by just writing-off Skype as a loss, MSFT is still a buy, and if they do something great with it, we can adjust our valuations upward accordingly.
What is your basis? I'm interested to know where you're coming from on that. Yes, foreign companies in communist countries are inherently riskier than an equivalent company in, say, the U.S., but what would lead you to believe they're fraudulent?
Great analysis, thank you!
Thank you for the criticism. Please allow me to elaborate my stop-loss statement. On this re-read, I agree it requires clarification.
I believe you should have a basis and expectation for every stock you buy, and if your basis is later proved false and your expectations are not met (especially on high trading volume), you need to re-evaluate, and most likely exit. For me, $4.30 is a long-term technical bottom set back at the end of 2006. If it breaks this level on higher-than-average volume, I believe the market will continue downward momentum, and my thesis has been proved false.
I agree with you 100% that stop-losses are dangerous if used on a standard percentage basis ("If the stock goes down 10%, I sell"), or on a round number ("If the stock drops to $25, I sell").
If it creeps down to $4.30 on low volume, I would say it presents an even better buying opportunity (holding constant all current information).
For institutional holders, I think it looks great:
Thanks again for your comment!
That's a good point to clarify about backing out the cash. In my valuation, to be conservative, I simply expensed the purchase of Skype since there was no publicly available forward plan. I believe you're correct that their cash isn't being used wisely. It's almost as if it's burning a hole in their proverbial pocket, and they had to spend it on something trendy (an impulse buy).
I believe the shareholder and public reaction to that acquisition will influence their further use of cash. They bought candy with their allowance, ate it all, and now have a stomach ache - hopefully they learned their lesson for at least the next few acquisitions. I believe we'll see sufficient ROI on the cash (left) on hand.
Yes, the downside appears minimal compared to the upside at this point. If you look at the 10 year chart, you can see that MSFT pretty closely follows the market (in part because MSFT is a large component of the 'market'). However, fundamentally, MSFT is undervalued, and technically appears to show a bottom around the $24.50 mark.
As I see it, LOGI's downward slope is at an end. The dwindling volume simply points to a lack of sellers at this price point and I think we're due to see a return closer to it's actual value in the next week or so. I put together a closer look on my blog here:
Agreed from a technical perspective on LXK and STRA. These stocks are due for a rebound based on their price/volume action as well. They made my shortlist today for technically-supported turnarounds.
STRA is a bit low volume, but it's found a lot of support around its current level, and based on the declining volume on which it reached that level, I would have to still encourage a long play. It made my short list today on technical long recommendations, and with the ratios being attractive, I would look for at least a short term jump in price.
Agreed very strongly on $NVTL. And from a technical perspective, it's poised for another jump up since the downturn has been on decreasing volume. I'm looking for that in the next week, based on my Trend Exhaustion technical indicator.
As a coincidence I am also long $NTRI.
To me, it sounds like RIMM is in a growing marketspace, even, as PlentyOStocks said, their slice is relatively shrinking (but absolutely growing). It was flagged in my Trend Exhaustion software as a near-term price reversal candidate. As a Contrarian, I'm recommending a buy on this bad news. Volume has settled, and I believe we've run out of sellers.
INTC and ALU putters are definitely wise. After those strong moves, I would certainly want to protect my gains too. I'm looking for INTC to take a bit of a bath in the next week or so, as the smart money cashes in on that gain and waits for a lower entry point.
Interesting that 2 of your 'safety stocks' (JNJ, NVS) made my overbought short-list today. Based on their recent price/volume activity, they look poised for a correction. And as you said in your previous comment, I believe we're in for a short term, market-wide sell-off. Many ETFs appear to be moving upward with dwindling volume support, which, to me, typically means we're coming over the crest of the hill into a decline (as I wrote on Thursday: ). I'm waiting for the correction before I go long anything with a high beta.
Yes, for the vast majority, market timing is a fool's errand. For those in for the long-term and not inclined to wait for bad news to buy a good company (like JNJ), I would recommend dollar-cost averaging by buying your stake in at least 3 separate transactions (over a period of weeks/months that you decide ahead of time).
Great points, and I agree with Dividend Player... JNJ is a long term player in the industry. However, after that recent run up, my Trend Exhaustion indicator flagged it as an opportune Sell, (Take Profit, Wait to Buy, or whatever other label you want to put on it). I just can't be a buyer on good news. IMO, the best deal on JNJ will be found after the next multi-point slide.