The RealMoney contributors are in the business of trading and investing all day on the basis of ongoing news flow. Below, we offer the top five ideas that RealMoney contributors posted today and how they played those ideas.
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1. Thinking About Google
Jud Pyle CFA
Jan. 16, 1:36 p.m. EST
right now should be aware that it could pin at 300 by the end of the trading day. There is big open interest in the Jan 300 calls and puts, so I would not buy too much above $300 or sell to far below $300, as it is likely to gravitate back to that level.
2. Morning Trade
Jan. 16, 9:21 a.m. EST
The emini is currently trading about 13 points higher and showing some nice follow through to yesterday's rebound (so far). Be aware that it is OPEX, and moves can be sudden and irrational (more so than normal) ... so don't get too comfortable on either side of the fence.
The emini is fluttering above and below the 852 and 854 levels ... I am watching these two levels as a directional cue. A move above 854 should push us towards the 862 and 865 levels. 862 should offer moderate resistance with stronger selling coming in at the 865 area. If the bulls really try to stick it to the bears we could see a surge as high as 873 ... with 879.50 as an extreme high.
A break below 852 finds initial support at 847 and somewhat stronger support at 842.50. Like Helene Meisler said this morning, I do not expect a reversal of yesterday's move ... but a break of 842.50 opens us up for selling back down to 831 with 823.50 as an extreme low for the day.
3. Sony Ericsson's numbers are out and its not good for the supply chain
Jan. 16, 8:42 a.m. EST
reported its fouth-quarter results, which included a 6% sequential drop and a 21% year-on-year fall in units shipped. It comes as no surprise, then, that its margins took on the chin, with gross margins falling to 15% vs. 32% in the year-ago quarter. This is but the latest thread for how December-quarter mobile shipments are likely to be. While some focus in on the device companies themselves --
and the like -- we have to look at what the impact will be across the supply chain for companies like
Advanced Analogic Technologies
and the like. My suspicion is not good.
Jan. 16 7:34 a.m. EST
held up better than I expected yesterday, which means we already need to look ahead to the Jan. 21 post-close earnings report. I'll have a preview of that next week, but I think that revenue and unit trends are more important than EPS, even as EPS could surprise to the upside due to margins.
Lots of talk yesterday about valuation support, given $27 per share in cash and almost $5 in trailing 12-month EPS excluding interest income. One thing to add to this argument is that if Apple holds EPS flat in fiscal year 2009 with similar cash conversion, cash could grow by another $9 billion, or $10 per share.
If you think 2010 is a year where Apple resumes EPS growth, you could start to value it using $37 per share in cash and $4.25 to $4.50 in EPS excluding interest income. That is an adjusted P/E of 10.
And the Jobs health option might now offer upside. I'd say yes if he comes back to work full time.
5. Expansion of SCHIP Program Bearish for Tobacco Stocks
Jan. 16 7 a.m. EST
Lost in all of the news flow was the story about how the House passed an expansion of the State Children's Health Insurance Program (SCHIP). Funding for this program is going to be paid for by a 61-cents-a-pack expansion of cigarette taxes. I am not expressing any position on the political merits of this legislation. However, the impact is going to be very dramatic on all of the tobacco companies and on the convenience store industry. Additionally, the drugstore chains that sell tobacco products may experience some hits as well, although they are more diversified. Finally, a number of smaller tobacco distributors will likely go out of business as their retail customers default.
There is a long history of tobacco tax increases and corresponding consumption decreases. Congress will continue to implement this policy, as there is no sympathy for the tobacco companies, although at the end of the day most of this increase comes out of the hide of people with low incomes who overwhelmingly supported the new administration.
I believe the major tobacco companies are well on their way to Johns Manville status. Johns Manville, for those who were too young or forgot, was a quality company that was essentially converted to a royalty trust for asbestos litigants who bled all of its profits. Eventually,
bought the company when all was clear. Same thing will likely happen in this case. Although Buffett will be dead and gone by the time the government stops milking the tobacco cow.
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This article was written by a staff member of RealMoney.com.