Archive for the ‘Stocks’ Category

5 Month ROI

Wednesday, February 4th, 2009

This is my past 5 months of returns. This excludes a £3000 withdrawal made on the 8th October thus everything from that date onwards should be £3000 more.

You can see when Lehman filed chapter 11 and a few weeks later when the markets rallied hard again. Oh I wish that could happen again. My stomach can only handle that kind of leverage once a year though!

Just looking for steady returns these days. £1000-2000 a month. The biggest challenge is ensuring my cash flow falls as little as possible when the markets are sinking. The DOW is down about 1000 points yet I am up. That puts me in a good position when we rally.

5 Months return on investment

5 Months return on investment

 

Currently holding:
1000 (LON:SOLA / NYSE:SOL (ADR) )
1 NDAQ100
400 NYSE:BAC
100 NASDAQ:CSCO
150 NASDAQ:INTC
500 NYSE:GE

Ditched BARC and RBS when they were in profit. Same for C and BAC. Bought BAC again though in this latest fall.

Heavier than i’d like on GE, but hoping it will pay off. It’s a risky one!

Renesola (LON:SOLA / NYSE:SOL)

Thursday, December 18th, 2008

Managed to get my position of 1000 shares down to an average of 112.50 pence. Holding the 1000, will buy more on the dips.

Waiting for another big move down from the markets. Got a lot of cash at the moment and want to pickup bargains again. Will probably invest more heavily this time around.

Also bought 1000 shares of Level 3 Communications (LVLT). Just an impulse buy. Maximum loss is $700 so I’ll see how that one turns out.

Short Wal-Mart (NYSE:WMT)

Monday, December 8th, 2008

People will say I’m crazy but that’s because people love bandwagons. Wal-Mart is a bandwagon stock. People have jumped on it because the economy is bad and everyone will shop for bargains.

If we look at the Wal-Mart valuation realistically though that is not going to happen. Wal-Mart was the stock to invest in 18 months ago as the bargain hunter stock. 

There are some problems with Wal-Mart and the fundamentals of the markets.

Wal-Mart has a P/E of 17 and is valued at $225B.
Dividend is nothing to write home about
A lot of other big blue chips are in the 10-12 P/E range
If Wal-Mart is a good bet when the economy is bad what happens when it recovers? Surely the growth will stop?
If the economy stays bad for a really long period of time surely we are going to go into deflation and see Wal-Mart profits drop too?
Deflation will lead to asset prices dropping further and big funds will have to give in and sell into the $225B monster
If the economy turns good I think investors will take their money out of Wal-Mart and start putting it elsewhere where larger growth prospects are.

You see, I cannot see any reason to not short Wal-Mart when it is in the $58+ range

Current holdings

Monday, December 8th, 2008

Nice rally today, I sold a lot into last weeks though.

Current holdings

4x NDAQ100 futures
100 Rio Tinto Shares
1000 SOLA Shares

I sold my 500 NVDA (Nvidia corp) last week at $7.75 and made 25c per share trading 500 last friday, wish I held on for the rally, but oh well it’s back down again. Also sold a NDAQ100 future today at 1200.

Lightened by position so I can concentrate more on work and load up if we dip down again.

Current Orders

BUY 500 NVDA @ $6
BUY 500 SOLA @ 90p 
BUY 1 NDAQ100 @ 1102

SELL 1000 SOLA @ 180p
SELL 100 RIO @ 1505p

Renesola

Wednesday, November 12th, 2008

Google Finance: http://finance.google.com/finance?q=LON:SOLA

A huge selloff here on some news from JASO.

Just bought 1000 @ 134.25p

Limit sell set at 200p, will consider selling at 150p+ depending on other market conditions. Been wanting to get in on this company for a while though. Not sure about a  long term hold at the moment. The way the markets are at the moment a long term hold may not break even for 5/10 years.

Buy the fear, sell the party

Update: Bought 500 more at 95 and sold at 110 and 500 @ 90 and sold at 105. I want around 2000 shares of this company. I am going to keep trading and if it drops heavily enough i may commit to another 1000.

Great Depression 2.0

Wednesday, November 12th, 2008

I’m so glad I sold into the recent rally. I knew it wouldn’t last. Inflation is no longer an issue in the world. Depression is on the way. The only way we can generate inflation is to print trillions of dollars. Rate cuts do not inject that much money into the system.

http://www.bloomberg.com/apps/news?pid=20601087&sid=axScg04s0X38&refer=home

The reason inflation is not a worry any more is because cash is in short supply. All these hyper inflated assets are crashing in price. There is no liquidity in the markets to buy them and no one wants them because they are not worth anything.

I do not understand the BoE inflation targets though. Inflation has been over the target for the past couple of years. Why maintain such static numbers for inflation? Isn’t that childsplay? Surely we should be looking at long term inflation rather than just a one dimensional YoY basis. If inflation is 3% one year and 1% the next we’re looking good, why would we want to aim for 2%? We’ve had 5% inflation this year and he’s worried about a -1% drop in inflation. Considering what happened with oil in the past year it is not a surprise that we are deflating. Is he seriously saying we want higher oil prices just so our inflation number looks nice? Oil hit $145 and is now sat at $57. That is a good thing!

Our currency is getting killed at the moment too so that is surely sending prices of goods up?

I still don’t understand the obession with inflation targets and controlling the economy with the interest rate. It seems like the dumbest system ever. Isn’t there quite a bit more to the world than that?

Also why are they surprised that price of materials are sinking so much? If something goes up 100% then drops 50% it is back where it started. Yes a 50% drop sounds bad, but in the bigger picture it is really nothing. So long as things maintain equilibrium I do not see the point of fussing about deflation in commodities as an effect of a bubble.

Real deflation where everything starts dropping in price is an issue. I think that is on the way. Jobs are being cut heavily. Wait till unemployment rises and people are desperate for jobs. Supply will out weigh demand and wages will drop. That’s when we’re in for trouble, especially with the amount of debt around the world.

I’m glad the UK goverment holds all my debt and I’m sitting on a nice pile of cash. I can’t wait to go shopping!

AMD Bailout. Nothing to rally about.

Wednesday, October 8th, 2008

ft.com

No long sentences to confuse people here, just facts.  What we know…

The Foundry Company

New manufacturing company
44.4% stake held by AMD
55.6% stake held by ATIC valued @ $700M (Abu Dhabi’s Advanced Technology Investment Company)
ATIC will add 1.4B in funds to the company with promise of $3.6 – $6B in investment in new facilities over 5 years.
$1.2B of AMD’s debt will be transfered (AMD debt is approx $5B).
Acquire Dresen fabs.
Plan to spend $3.2B on NYC fab.

 

AMD

$1.2B of debt transfered to TFC leaving approx $3.8B
Investment of $314M increasing stake to 19.4%
$700M from the TFC deal
No fabs
Huge loss of hard assets
No burden from fabs

So what has happened here? Basically a lot of strain has been taken off AMD but now they are effectively the same as Nvidia. They are a design company. The thing is if you are going to do this why would you want to use AMD’s laclustre manufacturing process?  Why not just use TSMC?

This brings up the issue of the cross licensing agreement with Intel. How will this deal satisfy the requirements of the cross licensing agreement? I mean if it does then why not just outsource to TSMC?

Big investment also brings up a few other issues. AMD is currently allianced with other companies, IBM and Toshiba to name two big ones. Will these companies be so willing to keep the alliances they have made? Will they expect more from AMD now? The idea of this alliance is to cut costs. With AMD’s investors having cash falling out of their backsides I can see the others wanting a bit more in terms of investment from AMD. I have the feeling they have been getting what is almost a free ride on the back of IBM lately. AMD only made chips for itself before. If they are going to become a foundry they also become competition.

Another problem that is overlooked is the overhead associated with out sourcing. Assuming TFC will be a complete seperate entity from AMD the two companies will have to work together as seperate entities. This will add time delay to development. If this isn’t the case then I don’t see why the company was split since to me it would imply the company is just two logical units but still one physical unit. TFC wants to be a foundry though so once other orders come in AMD may not get the priority over fabs they are used to.

The issue for investors is dilution. AMD is now heavily diluted and 20% is owned by Abu Dhabi. They will have approx 660M shares outstanding once this deal goes through. That’s about 50% dilution since 2005 (approx 430M shares in 2005).

Lastly here’s a comment from Dirk. I never understand comments like this though

Dirk Meyer, AMD chief executive, said the move allowed the group to maintain access to leading-edge technologies without having to make the capital-intensive investments of semiconductor manufacturing.

Someone still has to manufacturing the chips and maintain fabs etc. The costs are still there, just not directly on AMD’s balance sheet. Is Dirk saying that TFC is just being made to be a huge corporate loss machine for AMD? AMD may get good prices however both companies will be striving to have balance sheets in the black.

Woops

Monday, September 22nd, 2008

Dow 11,015.69 -372.75 (-3.27%)
Nasdaq 2,178.98 -94.92 (-4.17%)
S&P 500 1,207.09 -47.99 (-3.82%)

JPMorgan Chase & Co. -13.28%
Wells Fargo & Company -11.61%
Bank of America -8.88%

The short ban is working well. It’s almost as effective as a tea towel on a burning house.

I’m annoyed the market is sinking though. I don’t have an options account yet. It will probably be too late to take advantage of this temporary bubble by the time mine is verified and activated.

This all reminds me of a quote from an old music production lecturer. “You can’t polish a turd”. No amount of fiddling with the free market will fix the fundamental problems of the financial markets. All they have done is well, made things worse. 

Short sellers have sat back and seen that even longs have no faith in financial stocks. I’d expect financials to get hammered through October. Of course earnings is the key though. It’s all down to them. Check the consensus estimates. Wall St. is good at guiding really low so they can rob individual investors despite dire earnings.

Over reactions work in both directions

Saturday, September 20th, 2008

Fridays rally has caused the worms of ignorance crawl out the woodwork. The short ban co-inciding with a huge rally must mean that shorts caused the markets to sink? The beauty of correlation causation fallacy.

Most of the ignorance is coming from the UK where the FTSE was up nearly 10% at one point. What these people fail to realise and research is the FTSE futures and the fact that the UK markets close before the American markets. Americans can trade ADR’s for UK stocks after our markets have closed.

When the FTSE closed at 4884 on thursday the DOW was trading at ~10620. When the dow closed thursday it closed at 11027. The FTSE and Dow have quite a strong  2:1 point relationship. If the dow moves 2 the ftse moves one. This is not absolute on a minute by minute basis but it is a general rule I use.

When the DOW closed on thursday FTSE futures closed at 5080. That is almost perfect 2:1

The FTSE closed friday @ 5310 +8.84%.  The real FTSE rally from shot banning is only +4.5%. Still impressive but there are more factors to weigh in.

On thursdays news of the bank bail out American investors could cover their short positions.  On friday on the news of the short ban they could also cover. For the UK it was different. All that news came in one go. All investors wanting to cover will have had to cover in the same trading day. Heavy short covering means buying. These two factors gave sellers a unique opportunity. The big boys knew they had an amazing opportunity to squeeze a huge amount of shorts.

Just as a market collapses if they are no buyers it bubbles when there are no sellers. Check friday volume for financial stocks. Lowest of the week for most. This includes the huge option blocks that go through too. Lowest volume of the week on quad witching day? That doesn’t sound like a liquid market to me. Liquidity is the problem in the markets too. So what has banning shorts achieved? It’s killed the last source of market liquidity.

There is a hate for shorts. Thing is it is not their fault. If people were buying stocks and the stocks wouldn’t go down. No one wants to buy junk bank stocks though. Everyone is sitting and holding hoping for the best. AIG LEH BSC have all shown us you can end up with next to nothing. The rest of the financial sector is not faring much better than nothing either.

EDIT: It’s monday today and what is happening to financials? They are sinking. Oh what a surprise. But how is this possible with short selling banned? Maybe it is because shorts are only a fraction of the market?

Ambac (ABK) and MBIA (MBI)

Saturday, September 20th, 2008

ABK and MBI are two of the monoline bond insurers that got hit heavily hit in the credit crunch. They regained some ground in recent weeks which was surpising since nothing has really changed for them.

ABK was trading near $10. That may not sound a lot but when you put in 150% share dilution that is $25! It appears no one else in the market looked at this fundamental factor. They are probably all too busy drawing stupid lines and plotting worthless averages all over the graphs.

Well yesterday ABK and MBI were put on ratings reviews. Is this any surprise? Why would anyone suddenly think these companies were fixed and on the road to making profits anywhere near pre crisis levels?

As a result ABK has tumbled and MBI will probably go too. It’s a shame I couldn’t short ABK though, not because of the short ban but simply because it’s not a stock that I have been able to buy or sell since it got removed from the S&P 500. When it was up near the 10′s a week or so ago it just looked like a diamond opportunity. MBI is looking the same, but with a short selling ban on financials I will miss out again.

Maybe I should get off my ass and get an options account?

Today you can really earn your bacon

Monday, September 15th, 2008

Some really interesting news today

LEH files for chapter 11

http://www.marketwatch.com/news/story/lehman-file-bankruptcy-protection/story.aspx?guid={50D06AF4-0AD5-4B38-8206-D4C8D6E62EC7}

BAC buys MER.

http://www.marketwatch.com/news/story/merrill-lynch-bought-b-50/story.aspx?guid={CF19C66B-BEBF-4A50-AA1C-88BDE2D21FAE}

Massive news but a lot of other things have happened and will be neglected as important because they are not seen to be as significant as the bankruptcy and acquisition.

AIG Seeks $40B loan :O

http://www.marketwatch.com/news/story/aig-seeks-40-billion-loan/story.aspx?guid={F588B80C-2D77-43A2-A2B8-85BE4CC2C85B}

Banks setup $70B loan programme

http://online.wsj.com/article/SB122144631339134981.html?mod=mktw

ECB and BOE inject more money into markets

http://www.marketwatch.com/news/story/european-central-banks-inject-funds/story.aspx?guid={FB0CA8CD-48E9-48CC-996B-F219C8027E69}

Fed increases lending facility

http://online.wsj.com/article/SB122143939332934501.html?mod=mktw

Markets are sinking. No one will want to buy today. I’m not sure what to expect in the near tearm but I’m swinging towards an “unrealistic” rebound as loan liquidity gets sunk into the market.

Unfortunately I own some Nasdaq 100 but I’m hoping it won’t be hit too bad since there are no financials in it!

Nvidia : 10-Q Analysis Q2′FY09

Wednesday, September 3rd, 2008

Nvidia’s 10Q report for FY09 is now available. The report and other filings can be found under SEC filings in the investor relations section of their website. Alternatively there is a direct link to this quarters report here.

I suggest downloading it so you can use it to follow my analysis. The page numbers I will refer to will be the PDF page index not the page numbers printed at the bottom of each page.

The 10Q is an important document because it tells us how the business is really performing. Nvidia made a loss this quarter because of a one time charge. Simply looking at the figures we see they made a loss and without extra information we cannot tell what the future holds. A one time loss should be treated like a one time gain. If you got a £1000 tax rebate in April you’d be stupid to expect one each week for the rest of the year.

Lets start with a quick recap of the basic earnings on page 6.

Nvidia Q2 FY2009 Earnings

Nvidia Q2 FY2009 Earnings

Revenue was lower at $890M down $43M.
Cost of revenue was up $231M.
Gross profit was down $274M.
Research and development was up $55M.
Operating Expenses was up $66M.
Operating income was lower at -$155M down $339M.

Cost of revenue was up due to the $196M write-down consequently affecting gross profit.

If we take out this one time charge we can see the real operating figures for the company and build a better comparison.

Revenue: $890M down $43M.
Cost of revenue: $546M up $35M.
Gross Profit: $345M down $78M.
Research and development: $212M up $55M.
Operating Expenses: $305M up $66M.
Operating income: $41M down $143M.

We can now see that Nvidia is still profitable albeit it barely in comparison to previous earnings. It may not be fair to make such a direct comparison as things related to the write-down may have caused extra operating costs. Still we cannot deny that Nvidia is having a rough patch.

There are several factors that I believe are causing Nvidia to have a tough time.

  • ATI released new products which performed better than expected.
  • ATI have priced their products very aggressively to try and capture market share.
  • Most Nvidia products from this quarter were produced on a 65nm process. ATI products are on 55nm
  • meaning they use less silicon and more can be produced per wafer. This means larger margins.
  • The new Nvidia GTX 2xx series cards are very expensive to produce, hence their very expensive price on release. The ATI cards caused Nvidia to drop prices thus lowering income per chip by around $150.
  • They celebrated before they got to the finish line. They thought they were untouchable and now ATI have caught up again.

That’s quite a list of things chipping away at profits but it is also a list of things that when fixed will return this company to normal. A look at AMD’s 10Q shows that their graphics divison cannot even make an operating profit despite having had the manufacturing advantage for a long time now.

The shift to 55nm from 65nm decreases product size by approximately 33% which in turn increases the amount of products you can get from a wafer by 50%. This is a vital transision for Nvidia and they shouldn’t stop there. Manufacturing advantages can makeup for a poor product, just look at Intel’s graphics divison.

The most interesting part of the 10-Q is the breakdown of earnings into segments this is available on page 33.

Nvidia Q2 FY2009 Earnings Breakdown

Graphics is still taking huge revenue despite all the negativity. The writedowns are reflected by negative income but the actual figures are not so bad when you look closely. However there is a another notable strength. Professional solutions are really pulling some weight for Nvidia. Professional solutions are Quadro and Tesla based cards. Nvidia’s combined graphics chip related revenue is still huge.

The weak spot of the company is chipsets. Hopefully Nvidia will leave the chipset business or at least make it more profitable by scaling down the size of designs. The Intel SLI bridge may help them focus of the profit side rather than the revenue side of things.

CPB had a bad quarter (Tegra/Mobile). This however is the one to watch. This could make or break nvidias future as a real player in the markets. It is a market they’ll have to themselves which is what is important here. Nvidia are good at execution of products so there is every reason to believe their chips will be in more and more mobiles in the future.

Why the FTSE 100 is a poor measure of the current state of the economy and financial markets

Tuesday, May 20th, 2008

We are currently having a down day on the markets and it’s a good time to expose a big flaw in what people seem to think is a “recovery”.

Since march the indexes have started to rise again. People have taken this at face value and obviously the media do their part in inducing rubbish into peoples brains. Earnings season was considered good because most companies beat the low estimates and this is considered a reason for the markets crawling back up.

“Investors have regained confidence”

I beg to differ especially considering the low volume of trading on the markets in the past 3 months.

My first example is the FTSE 100. Every day I stare at big name companies that play an important part in the UK economy. British Airways, Royal Bank of Scotland, Barclays, Lloyds TSB are some examples. They flash red all day long yet I look at the FTSE and it’s in the green. Watching this happen a few times made me wonder. “What on earth is keeping the index up?”

The FTSE 100 is a market cap weighted index so when you see it go up whilst nearly every large bank is 3-5% in the red you begin to wonder what big money stocks are propping it up and what state the majority of the index in terms of the actual companies is in. With an economy built around financial services it just doesn’t make sense!

I got a list of all the tickers and pasted it into a Google finance portfolio. The reason for the recent gains became immediately obvious. The top 5 companies by market capitalisation are…

Shell (oil) – £135B
BP (oil) – £120B
BHP Billiton (mining) – £114B
HSBC (The only bank yet to get burned badly in the credit crisis) – £106B
Rio Tinto (mining) – £97B

Between them they amount for nearly £600 billion in value (over 1/3!). At time of writing FTSE has a combined market value of approx £1650 billion (Approximate FTSE market cap in millions can be worked out quickly by multiplying the current index value by 265)

I put them into a chart (below) and took a look at their gains since the march lows

Stock performance versus FTSE 100

BP RDSA HBSA RIO BLT

The gains are as follows

Shell: +29%
BP: +23%
BLT: +43%
HSBA: +7%
RIO: +34%

Those are impressive gains, especially for top 5 blue chip stocks. If we take away those gains what are we left with?

Shell: £105B (£30B)
BP: £97B (£23B)
BHP Billiton: £80B (£34B)
HSBC: £99 (£8B)
Rio Tinto: £72B (£25B)

Collectively these 5 have gained £120 billion in value! How much does this contribute to the FTSE? Remember the quick way to work out the market cap? Well we can reverse that and use it to find out how many points an amount of gains are worth

Gains (£ Millions) / 265 = Index Points
£120,000M / 265 = 453
Current FTSE 100 = 6260
FTSE 100 – Top 5 gains = 5807

5807 is not far off the range we were in back in March. All I can say is watch out below.

BLT and RIO are going up on buyout and investment speculation. BLT wants to buy RIO so RIO has gained. BLT has also gained because of some Chinese investment speculation. The Chinese don’t want the deal to go through due to interests in Iron Ore so they want to buy a big enough stake in BLT so they can block the buyout.

The way I see it is that whatever happens one of them will fall. If the chinese get their stake in BLT which enables them to stop the buyout of RIO, RIO will drop due to the buyout falling through. If they don’t get their stake BLT should drop because of no chinese investment plus they are going to have to invest a fortune in RIO.

I guess as usual the market is ignoring the facts and all investors are set to “optimistic”. RIO holders are holding on for one deal while BLT investors are holding on for the other. If I held either I’d have sold the lot by now. Looks like the market is doing so today.

BP and RDSA are going up because oil prices are soaring. What happens when Oil tanks? Do we get an oil co sell off? What happens if oil continues upwards? The FTSE 100 will go higher yet consumers will struggle more and more.

With all this in mind do I think financial markets are stabilising? No way. Libor is up. Commodities are up. Mortgage rates are up. None of those are positive for consumer based economies. It seems people are picking and choosing what they want to believe. Fact is the FTSE is only up because of certain components pulling a lot of weight. There are a few in the DOW too but that’s another story.