The defense stocks are an indirect way to play the growth in China. This is because China will be putting an increasing portion of its own investment in building up its military. The U.S. will have to respond in kind no matter what political winds are blowing. I write more in a piece in Commentary this morning.
Position: Long TDY
They were laying in wait for this one and BAC reports that big number and then whittles it down.. so the opposite of what JPM did....Bank hades coming today....
Position: jpm
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Doug Kass
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| Pressing My SKF Long |
4/20/2009 7:30 AM EDT
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Late last week, I mentioned that I was buying the UltraShort Financials ProShares (SKF).
I am pressing the long now.
Position: Long SKF
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David Sterman
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| Larry Ellison Rescues McNealy |
4/20/2009 7:36 AM EDT
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Well, it looks like Scott McNealy won't have to answer to irate shareholders after all, as Oracle (ORCL) will pay $9.50 a share for Sun (JAVA), according to the companies. Oracle is doling out $5.6 billion in cash (after backing out the acquired JAVA cash). This is a fairly radical move for Oracle as it ventures into new niches. Orace says the deal will be immediately accretive, which should blunt some of the potential investor angst regarding acquisition indigestion. There will be a call at 8:30 AM EST.
Position: none
I get the SKF bet off of BAC which is a mish-mash. Eaton really overpaid for its European properties and Europe's still going fown into what looks to be a depression.. Oracle? How could it buy this Sun!! Plus the dollar isn't what we want to see....
Position: none
To the readers who were frantic on Friday with the dip in the SRS/SKF, we are back to even money in the pre-market. Consider what your strategy will be as we enter the new week. If the shares are too volatile for your liking, you have room to peel some off. I'm holding for now.
Position: Long SRS, SKF
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Eric Jackson
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| Oracle Wants Sun's Installed Base |
4/20/2009 7:56 AM EDT
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It's fitting that IBM (IBM) and Oracle (ORCL) have been the ones fighting over Sun Micro (JAVA). Both have taken an aggressive approach to growing their top and bottom lines -- compared to, say, Microsoft (MSFT). The markets have rewarded growth over increased EPS as a result of retiring shares alone.
Sun Micro is a shell of its former self 10 years ago. It is simply being put to rest through this deal. For years now, it has struggled selling its older expensive OS (SPARC Solaris) in the face of Linux. Java has been popular but hasn't replaced that declining Solaris revenues.
Left alone, Sun would have continued to shrink. Why do ORCL and IBM want to buy them? Installed base. Both want those relationships which Sun has had for years so they can upsell new ORCL and IBM gear.
Sun's shareholders will ensure the deal gets done this time.
Position: Long MSFT
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Paul Rubillo
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| Oracle Comes in Out of Nowhere to Scoop up the Sun! |
4/20/2009 7:58 AM EDT
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Today's news of a Sun acquisition by Oracle is quite a surprise, and leave it to Larry Ellison to announce the deal on the day IBM is set to report earnings. My guess is that there will be little commentary from IBM's management on today's big story. I'm wondering if Sun's management relaxed their concerns about the due-diligence time factor for the Oracle deal to come about so quickly after the failed IBM negotiations. Market not liking the deal for Oracle so far, with the stock down nearly 6% in the pre-market.
Position: long IBM on our "Recommended" list
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Alan Farley
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| Palm (PALM) in Double Digits |
4/20/2009 8:00 AM EDT
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Palm (PALM) is trading over 10 this morning, after a BoA/Merrill upgrade. The stock has been trying to clear resistance at 10 since an exceptionally strong recovery stalled just under that level in February. The longer-term chart shows another hurdle around 10.35. Once that level is breached on a closing basis, momentum could kick in and set off a strong rally.
More technical comments and annotated chart here.
Position: Long PALM
Assuming JAVA didn't start talking with ORCL until the IBM talks hit a wall, the two sides got a deal done very quickly. There is still a lot of good deals to be had in tech, as the buyers have lots of cash, the sellers have low stock prices, and the whole industry is need of avenues to growth.
Everyone's got their favorite M&A plays in the space, but the most logical target (in my view) is now Network Appliances (NTAP), as the prospects for storage are still very appealing, especially with renewed interest in data centers. NTAP is up about 4% this morning, and will prbably see decent chatter this week as the "who's next" discussion begins.
Position: none
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Eric Jackson
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| Five Stocks which will Drop, but Might still Snap Back Higher |
4/20/2009 8:20 AM EDT
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A friend of mine said to me yesterday that he's never seen so many stocks that trade like options. They're "bifurcated specials" -- either they're going to double or triple from here or go to zero in fairly short order.
Even though many commentators, including Doug Kass in these pages, are warning against the market being short-term overbought, there are some stocks of companies with bad fundamentals facing terrible headwinds, which nevertheless keep going up in the short-term. Even though they look overbought, it's difficult to pull the trigger on shorting them.
Stocks like Harley-Davidson (HOG), Capital One (COF), Royal Carribbean (RCL), Carnival(CCL) and Liberty Global (LBTYA) have gone up 50 - 110% in the last 6 weeks. Yet they're down 50 - 65% in the last year. It's an overbought snap-back.
Eventually, the weak consumer environment that will persist will sour their results and impact the stocks. However, investors need to be mindful of betting on a downturn too soon -- which can be just as hazardous as betting on a recovery too soon.
Position: None
The real reason Oracle (ORCL) had to buy Sun Micro (JAVA) was not for its installed base, its hardware platforms, Java, etc., but for MySQL. Sun bought MySQL in May 2008 for about $1 billion. MySQL is to Oracle's SQL what Linux is to the Windows OS. Basically, every VC-funded start-up and many small enterprises were switching to the more cost-efficient and steadily improving platform of PHP/MySQL (as an example, I built Stockpickr with MySQL, which it continues to use). There was a real danger that as the platform continued to improve under the stewardship of a blue-chip tech company like Sun that it could put a dent in Oracle's bread-and-butter software. Oracle also couldn't take the chance of IBM (IBM) owning it. Kudos to Oracle for stealing this away in an accretive manner while securing its future. Oracle will be here 100 years from now, and is a buy on any merger arb dip.
Position: long ORCL
It appears the market is ready to start that long awaited pullback... If that is to be the case I am going to expect the QQQQ to drop to around 32.50 to 32.60 from the open then pop to around 33 where I will look for a short... The pattern of trading lately is a move down early then afternoon recovery.... If we pull back, that will change... We have leading indicators due out at 10:00...
Position: NM
The next deal: Hewlett-Packard (HPQ) should buy STEC (STEC). I last recommended STEC in November in the 4's, and sadly I just took profits in the 8's so I no longer own it. That said, STEC is the leader in Solid State Drives and is the only supplier of these drives to Apple's (AAPL) high-end laptops.
SSDrives are the future of drives, and HPQ needs to get into the space.
The company would quickly gain a huge edge on all of its competitors, which are 24 months-plus behind the eight ball, increase margins for desktop and laptop PCs.
Analysts think that STEC is trading for only 11x forward earnings, but my guess is its more like 8x, taking into account that AAPL always ends up gaining market share faster than people think.
Position: No positions in stocks mentioned
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Jim Cramer
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| Stress Test Turner network |
4/20/2009 8:56 AM EDT
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If anyone knows the derivation of the stress test from the Turner network, which reads like a Roubini fantasy, it would be most helpful...
Position: none
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Eric Jackson
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| Beginning of the End for Ken Lewis |
4/20/2009 9:01 AM EDT
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Next week, on April 29th, Bank of America (BAC) will hold its annual meeting. An issue which will come to a head there in a shareholder vote is whether Ken Lewis should retain the two roles of Chair and CEO.
Longtime BAC shareholder Jerry Finger (who sold his bank to NationsBanK in 1996) put the issue on the proxy and is right to call for change, given the bank's disastrous performance in the last 12 months.
Late last week, we learned the 3 largest and most influential proxy advisory firms (RiskMetrics, Glass Lewis and ProxyGovernance) all threw their support behind the splitting of these roles. This means it's virtually assured that the split will happen, given how closely large institutions and pension funds follow these suggestions from the advisory firms.
In my view, this stripping of Lewis' Chair role makes it more likely that Lewis will also step down as the bank's CEO in the next year. He's already dropped hints that he is open to doing so "when the crisis passes" -- that's CEO-speak for "Ok, I'm getting tired of the abuse I'm taking."
If BAC really wants to show shareholders (including the government) that it's turning the page, a change at the top is probably best for everyone.
Position: None
The next deal: International Business Machines (IBM) should buy Sybase (SY).
IBM would gain key access to SY's database server as well as SY's rapidly growing SY360 business unit, which handles a large portion of wireless messages -- emails, texts from Research In Motion (RIMM), Apple (AAPL) and so forth. This would vertically integrate IBM's business model from handling the data from mainframe servers all the way to PDAs.
Moreover, as general play off the increased use of wireless content, IBM would also gain additional clients, particularly in the finance sector.
Position: No positions in stocks mentioned
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Jim Cramer
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| Stress Test Turner story |
4/20/2009 9:08 AM EDT
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Thank you readers. The Stress Test Story has been pulled and is erroneous,. Those selling on it--as opposed to all of the other things to sell on--should relent...
Position: none
871 = 87.60
868 = 87.30
863.50 = 86.80
856.50 = 86.10
849.50 = 85.40
845.50 = 85
841.50 = 84.60
835 = 83.95
Position: Short SPY
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Bob Byrne
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| Morning Trade |
4/20/2009 9:27 AM EDT
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We begin the week with the emini trade lower by close to 2% and just above strong support at 849.50. The bulls need to step up and defend the 849.50 area if they want to beat away the traders looking for a correction. Above 849.50 and traders set their sights on moderate resistance at 856.50 and strong resistance at 863.50. The 863.50 area should be an area the bears lean on...so it certainly has the potential to be a stumbling block for any recovery by the bulls. If traders are able to push us through 863.50 they should have no problem with weak resistance at 868...but then comes 871 which may prove to be too much for the bulls.
The bears need to bully this market under 849.50 if they want a shot at the much anticipated correction. A sustained trade under 849.50 and the bulls will find moderate support at 845.50 and strong support at 841.50. I expect the bulls to make a stand near 841.50...otherwise it's a quick drop to moderate support at 835.
Position: none
The big test for the markets will be how well it embraces the upgrades/numbers raised this morning in key names such as Amazon (AMZN), Apple (AAPL), General Electric (GE) and Cisco Systems (CSCO). If those stocks do not hold up, the downside trade will be a lay-up for traders today.
Position: Finding the gauge is like finding the right wire under the bus in the movie "Speed" (just watched it with my little guy this weekend - great movie!). Know how to maneuver it and you will succeed.
The NYT is reporting that Mr. Geithner thinks he can stretch the TARP by converting the government's preferred bank shares into common stock. I found this story poorly sourced and I don't believe a large conversion of preferred into common is Geithner's next step.
Converting preferred into common does improve the TCE ratio as the story indicates. However, the TCE ratio is the ratio shorts invented so they could bludgeon the banks. TCE is not a regulatory ratio. I don't think that the regulators are going to see much value in massaging the numbers simply to boost the TCE ratio. It won't help their goal of making sure that the banks have enough regulatory capital to keep lending.
Position: long pgf
The conf call is just starting. Sorry for the late update. BAC had a nice eps and revenue beat ($0.44 in actual eps vs the $0.04 estimate,) in q1 '09 results reported this morning. Ken Lewis talking on the call now and talking about the big jump in credit loss provisions. He also just said that Merrill Lynch contributed $3.7 bl of net income (before considering merger expenses) of the total $4.2 bl net income. Lewis just said MER and Countrywide were accretive to earnings.
Position: none
Good morning. I received quite a few emails about the video I posted yesterday that analyzed some of the technical and psychological indicators that are providing some insight into the current market...if only to help you understand the root of the confusion.
I'm reposting it here just in case you might have missed it.
Position: nm
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Paul Rubillo
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| Overhead Levels to Watch for the SRS/SKF/FAZ |
4/20/2009 9:48 AM EDT
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Just want to share some levels traders may want to keep an eye on for the heavily traded Ultrashort trading ideas mentioned. The Direxion Financial Bear 3X Shares (FAZ) is one that I am getting lots of e-mails on. Look at the $11.50 area as a first area of overhead resistance, if the stock continues to move up today. The UltraShort Real Estate ProShares (SRS) area to watch is in the $34-36 spot, if we continue to ramp. Lastly, the UltraShort Financials ProShares (SKF) level I am watching for some overhead resistance is in the $69-70 zone.
Again, as I mentioned earlier today, if you are concerned about the volatility of these plays, you have an opportunity to book some gains here. Worst case, move up your stops (Something I have done for years) and don't let the profits disappear.
Position: long SRS, SKF
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Scott Rothbort
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| Buy Me Some Peanuts and Cracker Jacks |
4/20/2009 10:04 AM EDT
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I had the pleasure of going to the new Yankee Stadium yesterday. It really is a wonderful facility (aside from the ease of home runs). Unlike the old stadium you can go to the vending services and still watch the live game. You can walk around the entire stadium from the inside (it is a mile around I was told). Walk around it I did. I was only able to spot two public corporations with presence as vendors at the stadium - Nathans Famous (NATH) and Nike (NIKE). All else appeared to be privately held. This reminded me to look back on my Real Money Idea on NATH. I still believe that the stock is a buy at $13 and sell at $16. The trade still holds true and was a great opportunity when the stock dipped below $13 a few weeks ago. Any reports from CitiField? Get TheStreet.com Mobile now with RealMoney on your iPhone and BlackBerry. Use iTunes, The Street.com Mobil or BlackBerry App World to get the latest version!
Position: none
Quick reply to Eric Jackson's post from earlier regarding "Beginning of the End for Ken Lewis" and next week's Bank of America (BAC) proxy vote. I had Jerry and Jonathan Finger on TheStreet.comTV for an interview last week to discuss their move to oust Ken Lewis.
Also, while you are viewing TheStreet.comTV, you may want to check out my interview with GameStop (GME) CEO Dan DeMatteo on TheStreet.comTV. He says there may not be lines around the corner for Nintendo Wii consoles, but sales are still strong. A lot of worry there.
Position: None
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Eric Jackson
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| Yahoo! Will Be a Good Long -- In Three Quarters |
4/20/2009 10:20 AM EDT
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I've had a love-hate relationship with Yahoo! (YHOO) for nearly three years now. I led an activist campaign against the company in 2007 encouraging it to make a number of changes (from a new CEO to revamping the board to restructuring and simplifying the operations) to better take advantage of its many strengths (strengths Yahoo! still retains to this day, including its tremendous brand and traffic).
Unfortunately, I (and other shareholders) was only successful in helping to effect one important change: a new CEO after Terry Semel stepped down thanks to a large "against" vote at the June 2007 annual meeting.
I sold my Yahoo! stake last September at $20 after being frustrated by the "status quo" message coming out of the board and management at last August's shareholders' meeting. With the exception of Icahn and his associates, the Yahoo! board is substantially the same as it has been for the past five years, when the company sagged behind Google (GOOG) and others.
I think Carol Bartz seems to be saying and doing all the right things since she came aboard (with the exception of offering a bounty to employees who turned in other employees for leaking news to the press). She's cutting and consolidating in a way that Yahoo! has desperately needed for years. Just last week she sold off the Korean Gmarket stake to eBay (EBAY) and could still monetize other Asian assets.
Yet, even without the headwinds of the ad market, she has a lot of work still ahead of her in restructuring -- and she still is overseen by a terrible board of directors. The Yahoo! bulls seem to overlook how real organizational and cultural change takes time.
Yahoo! has a lot of upside -- in three quarters -- but after Bartz has more time to clean things up.
Position: None.
XOM down 0.60% more than seems to be holdings its weight given the 3.2% decline currently in the S&P 500 and the almost 7.5% decline in oil. Worth noting.
Position: none
Adam, any thoughts on this morning's purchase by GlaxoSmithKline (GSK) of Dermatology leader Stiefel Laboratories Inc.? Do you see any benefits/drawbacks to quasi-cosmetic play Allergan (AGN)? Any biotech names to watch off of this news? There were recent rumors that Allergan may have been in play. (shares jumped to the $48-50 levels on those rumors weeks back)
Position: none
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Eric Jackson
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| CEO Accountability: Why They Need to Be on all Earnings Calls - and Taking Questions |
4/20/2009 12:20 PM EDT
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Some great feedback to my Friday post about how I think it's shameful when any public company CEO (like Vikram Pandit at C or Steve Ballmer at MSFT) misses a quarterly earnings call with analysts and (more importantly) shareholders.
One reader said:
As an institutional investor, I am appalled when CEOs aren't [on these calls], and I always read it as somehow sneaky or deceptive. Macy's (M) is famous for this. Terry Lundgren is NEVER on the calls. And Tom Ryan at CVS tried to get away with not being on the calls a while back, but finally came back. Mike Jeffries at ANF has been on and off the calls. As soon as his new CFO gets more settled, I bet he gets back off the call.
Next worse practice is when companies do prerecorded, listen-only calls. WMT does this. TIF does a live call, but doesn't take any questions.
Frankly, if you're man enough to be CEO, then you should be man enough to answer investor questions four times a year in a public forum. If you're not, that's a
definite strike against me wanting to provide capital to your company.
Absolutely agree.
Position: Long MSFT.
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Phil Pearlman
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| Trading Around $RTH and Stalking May $SPY Puts |
4/20/2009 12:45 PM EDT
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At expiration on Friday I was assigned only the short call position in $RTH.
These were the Apr 75s so I am now short the common at 77.9. I have taken profits on half of the position down here and written the May 70 puts against the rest of it.
This serves to better my cost basis by another buck and limit my profit to 69 on $RTH until the close on May 15.
While I want to be short $RTH and want to have a full position, I am cognizant of the fact that this is a trading environment and so the adage "take 'em when you got 'em takes precedent."
I am stalking writing out of the money May $SPY puts and if the market extends even lower this afternoon and into the close will begin establishing that position small and way out as there is still a ton of time, 20 days, until the May expiration.
Position: Short RTH Short RTH Puts
Halliburton (HAL) is up over 2.5% today after a very weak open. The stock gapped lower following its latest earnings report but did not stay down for long.
HAL Daily (NYSE)
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TradeStation |
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The stock is now trading above last week's highs on very heavy trade. Considering that every DJIA stock is down, as well as 480 of the S&P 500, Halliburton is performing extremely well.
I expect volume to spike to a level equal to its heaviest of the year by the close. This would be the fifth consecutive advance on above-average volume continuing a powerful run since the stock successfully tested the $15.00 level on April 1.
HAL Weekly (NYSE)
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TradeStation |
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The January $21.50 highs will be a major hurdle of the current rally, but I believe that Halliburton is in a very strong position and will test this level in the coming weeks.
I am currently long the stock and will look to add to this position on light-volume weakness this week.
Position: Long HAL
Very slow and choppy as we grind around our lows...Next levels of support on the emini are 833 (strong), 825.75 (mod), and 819 (mod).
833 = 83.75
825.75 = 83.05
819 = 82.35
Position: Short SPY
The SOXX appears to have hit a recent near-term high of around 255 last week, and this week will prove to be a test of whether the 25% move from late February can hold, as a number of reports hit the tape. Investors expect to hear of sigsn of an industry trough (and the over-used "green shoots" phase to come). That was Intel's (INTC) sentiment earlier this month, which few seem to buy right now.
Today, we get Texas Instruments (TXN). Tuesday brings Advanced Micro (AMD), Altera (ALTR), Broadcom (BRCM) and SanDisk (SNDK). On Wednesday, we'll hear from Lam Research (LRCX), Novellus (NVLS), and Xilinx (XLNX). And on Thursday, we'll see reports from KLA-Tencor (KLAC), and PMC Sierra (PMCS).
This group is often an early harbinger of an eocnomic turn, but it still may be too early to expect rising book-to-bills any time soon.
Position: none
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Paul Rubillo
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| Quick Weekend Snapshot/Trading Anecdotes |
4/20/2009 1:32 PM EDT
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For those who may have missed this snapshot I put up over the weekend, take a look at how far some of the following REITs/Financials have run since the Mar.20 close.
American Express (AXP) - up 78%
Bank of America (BAC) - up 72%
Capital One Financial (COF) - up 57%
PNC Bank (PNC) - up 55%
Simon Property Group (SPG) - up 51%
Wells Fargo (WFC) - up 45%
JP Morgan Chase (JPM) - up 44%
Vornado Realty Trust (VNO) - up 43%
BB&T (BBT) - up 35%
Avalonbay Communities (AVB) - up 35%
I have been selectively going in and out of the UltraShort Financials ProShares (SKF) and UltraShort Real Estate ProShares (SRS) with the nimbleness of Deion Sanders hugging the sidelines on one of his many patented returns from back in the day! Friday's market action had not treated my entry levels that were discussed on Real Money CC ($27-29 for the SRS, $58-62 for the SKF) well, but the stops were in place if the damage would have gotten worse. Today is bringing a new day and profits to the trades.
I measure lots of different data and sentiment to try and get the trading returns that I am happy with. Traders need to do the same, especially on the conviction side. Judging by the tons of e-mails I received on Friday, there is a skittishness in traders that just needs to be handled as best that it can. If you want to e-mail me and feel that can help, keep the e-mails coming! I'll do the best that I can to get back asap.
Controlling emotions is part of the equation. Do I get nervous? Sure, it's human nature! That said, I expect each trade to either end good or bad. Hopefully good most of the time. Doing the homework and finding the best risk/reward is a big part of the battle. Knowing what you do right and what you do when you make a mistake should always be evaluated. Just like in Poker, you will sometimes get beat with a hand you will never lose with 90% of the time. Part of the game!
I am taking advantage of today's run at current levels for the SRS/SKF to peel some of the profits off here, and waiting to see what the rest of the day brings.
Position: Long a bit less of SRS, SKF and again, feel free to reach out. I really enjoy the feedback!
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Jason Schwarz
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| Third Strike For Geithner Won't Be Pleasant For Investors |
4/20/2009 1:53 PM EDT
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Uncertainty is back to the financial sector following the common stock comments from Emanuel over the weekend along with Geithner's pending stress test results due May 4th. It seems that the Obama administration is waging a war with the banks after comments like the one from Jaime Dimon suggesting he wants nothing to do with PPIP. None of this is good for investors in either bank stocks or the broad market. Read my complete view on why Geithner's Strike Three has caused me to buy some SKF. CLICK HERE
Position: newly long SKF
Paul, I will jump in for Adam, as he is currently "out of pocket." I'd chalk this up to further recognition that pharma companies are diversifying into consumer or consumer related products. Drugs may have great brands, but the day they go generic, the HMOs and PBMs put the brand virtually out of business, putting terminal value equal to zero. On the other hand, the consumer touching brands have a terminal value. The dermatology channel certainly falls into this category because the distribution channel is not 100% pharmacy based, and there tend to be far fewer generic competitors when those derm creams/lotions go generic.AGN's Botox franchise fits the bill for sure. As far as whether or not the rumor is a near term reality - I haven't a clue. There have been about a half dozen acquisition rumors in healthcare names over the last couple of weeks. In hindsight it seems like a lot of hot air for now.
Position: none
Today Pepsico (PEP) decided to announce its quarterly results three day premature as part of its concurrent announcement of the acquisition of both of its related bottling companies - Pepsi Bottling Group (PBG) and Pepsi Americas (PAS). As a result we will not be covering the PEP earnings call on Thursday as previously planned. However, I thought that a few words are in order with respect to the actual earnings release.
PEP was expected to earn 67 cents on revenues of $8.28 billion. Instead the soft drink and snack manufacturer earned 72 cents on revenues of $8.26 billion. Excluding benefits from mark to market on hedges net of restructuring charges the company earned 71 cents.
Volumes in the beverage business continue to be under pressure, declining 6% during the period. Despite small volume declines in the food divisions, revenues and operating profits rose in that segment.
My initial reaction is that the approximate $6 billion acquisition of PBG and PAS is a strategic and operational win for PEP. I would note that as part of the deal PEP will obtain close to $1.2 billion of cash from these two bottlers and assume $6.4 billion of debt. As the deal is for cash and stock, for shares not already owned by PEP, the capital implications of the acquisitions need to be more closely examined. Thus, I plan on doing more work on the combination of these three companies.
Position: Long PEP (only in a personal charitable trust)
Justin, thanks for that insight. I hadn't thought about the generic/consumer competition factor, but that is a great point. Something that I am sure big pharma companies have come to realize over time.
Position: none
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Moby Waller
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| Downside Support Levels for S&P |
4/20/2009 2:34 PM EDT
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Should the selling continue this week, I'm looking at 800 as a logical support level for SPX (around 837 currently). Below that, interestingly enough, a 50% retracement from the 666 low to the 875 high is right around 770 ... so that is another level to watch as well.
Position: Short-term Bearish
Just wanted to let readers know that I put the SPDR S&P Homebuilders (XHB) play on my radar gauge. If you remember, contributor Rick Bensignor mentioned the play back on Apr.15 as it broke up through the $11.98 level. His stop was at the $11 level. But he was looking for the $13.91 (200 day avg.) to possibly be broken through on the upside. Stock is at $12 right now. I am not bullish on the builders, but the XHB did trade 36 million shares on Wednesday. Nothing to sneeze at!
Position: none, but respecting the strength of the recent homebuilder rally
This Lennar equity offering really negates what we wanted to see, re Pulte-Centex. I think that really hurts the group which has been on fire.. In the meantime the "back to earth nature of the WHR/FO/BDK mob is pretty difficult to watch.. Also, Textron--oh doctor, remember that bid? SOX down really badly but not down 5% yet, closing in, maybe we get a chance to buy if TXN's a little negative. ...
Position: none
Getting lots of feedback from traders that did well with the SRS/SKF move today. Credit to Doug Kass as well for the SKF call! But there are also many that were frustrated to have missed some of the run-up as well, by getting out "too early" as some put it. Getting out too early is not a bad problem to have, but can sometimes indicate that one has built up the position to a size they are not comfortable with.
A possible solution to this is to scale in and out of your trades. I often found early in my trading career that I would get restless if I had too much size in a position and would often make a preemptive move that would have me eating the appetizer, but not sticking around for the main course. It takes more work to remember positions that you may still have open, but your profits may start to increase per trade. That's what I found was the result.
Remember to use stops to prevent big losses regardless. Also, use trailing stops as your positions are working well in your favor also. This will increase your profit potential as well.
Position: appreciate all the feedback and I was able to formulate this post from all the questions/comments I received. Keep em' coming!
This was a great call.. Just a great call, thanks Doug!
Position: none
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Jim Cramer
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| Although I Am Tired of Doing This |
4/20/2009 3:33 PM EDT
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I will point out that I don't think the SKF has a place in this market for retail investors, but I am not going to tell someone here not to use it to profit. That would be ridiculous.
Position: none
5% to 7% in bull markets are buys, but we are only down 4% on the S&P 500, which makes it tough...
Position: none
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Eric Jackson
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| Green Mountain Coffee Roasters Brewing Up Some Strong Returns |
4/20/2009 3:37 PM EDT
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Hat-tip to Louis Navellier for a great profile of Green Mountain Coffee Roasters (GMCR) this morning.
This company has been on my radar screen for the last three months because of the abnormally high number of times I've seen it listed as a core long holding at some top hedge funds in their latest 13-Fs.
Brett Barakett's Tremblant Capital, Julian Robertson's Tiger Consumer Management, David Rosenberg's new firm Gluskin Sheff, DE Shaw & Co., and Ken Griffin's Citadel all own stakes in the company.
The company supplies coffee to a number of other brands, including Paul Newman's line (which is how I tried the coffee for the first time a few weeks ago and was blown away). It also owns Tully's, a big chain that runs from San Francisco to Seattle. It appears to be well managed.
The stock is up 35% YTD and appears to be well run. My biggest issue with the stock is its premium roast price: 31 times forward earnings. One to watch and perhaps wait for, but certainly one to drink.
Position: None.
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Jim Cramer
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| Velocity of the Decline.. |
4/20/2009 3:50 PM EDT
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The velocity of the decline has abated because:
1. the option overhang seems done; and
2. people fear good news from IBM (IBM) and Texas Instruments (TXN) -- nice change of pace.
Remember, the bears will be all over Wells Fargo (WFC) like they were Bank of America (BAC) and we need some clarity from Washington about what the political leaders mean about cram-downs...
Position: Long WFC
Just as a quick update! Peeled off some more SRS/SKF and have my position size down to 20% of original entry size. The move today was quite nice. I will not worry about leaving a bit on the board going into tomorrow.
Position: long just a smidgen of SRS/SKF
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Paul Rubillo
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| Eric/Green Mountain Coffee Roasters |
4/20/2009 4:04 PM EDT
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Eric, I am in agreement with you on the valuation concerns. Green Mountain Coffee Roasters (GMCR) is a pure momentum play, but it has been performing like a rock star. Shorts have undoubtedly been watching the same valuation issue we have, but we have seen consumer names like Chipotle Mexican Grill (CMG) skyrocket and cause lots of pain to traders trying to nail a top.
GMCR is one of those names that I would only play in small doses if I wanted exposure on the long side. If there is any break, that is when the short sellers should make a move, but not until the event happens.
Position: none
Regarding Jim Cramer's inquiry as to how the so-called "scholars" of the market can continue to argue that buying and holding index funds has "worked," I discussed this topic with Vanguard founder and index-fund proponent Jack Bogle in a
video last summer. Mostly Jack railed against the fees associated with trading.
Since trading costs have significantly come down, I pressed him a bit. I asked Jack if the world moved faster nowadays and if index investing still works in a world where a practically new company like Google (GOOG) could put a century old business like The New York Times (NYT) out of business almost overnight.
He replied: "Yes, the pace is enormously fast and destructive to many corporations. However, the conclusion this leads me to is not to go around trading, but to own the entire U.S. stock market instead. When you think about it, if you own everything, all the money that Google is making, arguably at the expense of the New York Times, then if you own both of them then you are doing OK. You own the old and you own the new, and you don't have to guess which is which."
Position: Like Arthur Mercante in the ring with Ali and Frazier. Keeping score and way out of my weight class.
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Eric Jackson
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| CEOs and Other Execs Should Be Barred from Serving on Outside Boards |
4/20/2009 4:18 PM EDT
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Where do current CEOs and even their underlings get the idea that it's a good idea for them to sit on another public company's Board of Directors?
This was a big beef I had with former Yahoo! (YHOO) CFO Sue Decker. Over the last two years of her tenure at Yahoo!, she received two promotions, going from CFO to eventually president (although she always referred to herself as Jerry Yang's "partner," which I assume means she thought of her job as co-CEO). With each promotion, she received increased responsibility and an increased number of direct and indirect reports to oversee.
The pressure on her and the rest of Yahoo!'s board and management to turn around the fortunes of the floundering Internet company remained intense -- yet, the stock collapsed. Through it all, Decker continued to serve on no less than three other public company boards: Costco (COST), Intel (INTC) and Berkshire Hathaway (BRK)). I asked her and Yahoo! Chair Roy Bostock at last August's annual meeting how they justified her spending what I calculated to be an extra 187 hours a year on different outside board and committee meetings (although I didn't factor in travel time to Omaha, Neb., and Issaquah, Wash.). Neither Decker nor Bostock really had an answer.
Bostock said the Yahoo! board was "proud" of Decker's associations with this other board. As a shareholder, I understood how these directorships were a benefit to her personally but didn't see how they were helping Yahoo!'s stock price. Decker left the company a few months ago when Carol Bartz was hired as the new CEO.
I recently was going over Citigroup's (C) board of directors from last year (before the bottom fell out on the company). I was stunned to see that Alcoa's (AA) then-CEO Alain Belda, Xerox's (XRX) CEO Anne Mulcahy and Dow Chemical's (DOW) CEO Andrew Liveris were all taking time out of their busy jobs to hobnob in NYC on that board.
In retrospect, shareholders for all three of these CEOs' companies should have been ringing the alarm bells when they saw this. These three companies' stocks are down 70% on average over the last 12 months. To make matters worse, Mulcahy also serves on the boards of Target (TGT) and Washington Post Company (WPO).
Let's be honest: The only reason these busy CEOs agree to serve on these other boards is vanity; it's not for the knowledge they glean or the social contracts they make. In this post-Sarbanes-Oxley world where directors have to slog through binders of risk disclosures and company updates, it makes no sense for any officer to sit on an outside public company board.
Not only does it hurt their own firms' stock prices, it hurts the stock prices of the companies on whose boards they sit. Did Liveris and Mulcahy really have enough time to go through the full extent of Citigroup's risk exposure last year? The composition of Citi's board is another story entirely.
Position: None.
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Eric Jackson
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| RE: Paul/Green Mountain Coffee Roasters |
4/20/2009 4:34 PM EDT
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Paul, I agree with you on the risks of playing the momentum of Green Mountain Coffee Roasters (GMCR). Kudos to all who've owned it. I just can't get comfortable with jumping in here (although great performer today in a terrible tape).
Just my style to stick to the unloved but still strong companies. I get nosebleeds with stocks at GMCR's valuation level. Like you, though, GMCR is still one I'll keep on my watch-list.
Position: None.
If you remember this morning's post on the upgrades/gauge to watch (Cisco (CSCO), General Electric (GE), Apple (AAPL) and Amazon (AMZN)), I mentioned that traders should keep an eye on the price action to see if the early downside action was going to reverse.
None of the names were able to mount much of anything, so that made the downside action even more easy to embrace for those long the SRS/SKF. I will continue identifying the spots for traders to key on as they pop up. Have a great night everybody, and keep the questions/feedback coming. Totally appreciated!
Position: Long a touch of SRS/SKF still
I'll be on Larry Kudlow's show tonight, wearing a dress shirt, tie and suit jacket on top of surf shorts and flip flops.
Position: Always a trendsetter in "business casual"
i wasn't too excited about this hard one day washout as either bullish or bearish. failed rallies are more decisively bearish in my opinion than this kind of action, but this wasn't bullish either. i made some quick money on a day trade in SKF, but i got out of before the close because i'm staying very disciplined and you never go broke taking a profit. the bounce in gold frustrated me because i've been waiting for it to sell off closer to the low 800's so i could take a large position in DGP. i am starting to get interested in oil again though. if it gets back down around $40 or lower, i will start buying either UCO or DXO again for a trade. i do think that the common stock of BAC and C are headed for AIG territory, and the market is starting to realize that. also, i think that you can't have a real sustained stock market rally or economic recovery without a big rally in the energy and commodity sectors. China is driving any real recovery, and the Chinese use a ton of energy and commodities. that's my view, which i think is similar to what Jim Rogers recently said. i don't mind having that kind of company.
Position: none
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