Stocks in the News
I saw some interesting news that seemed worth pointing out
ETFC - They have drooped in light of the recent Financial sector concerns. I missed the chance to make a few pennies on June $4 covered calls, but I think next week, after Friday's options expiration, the stock should lift and give us a good opportunity.
Meanwhile, they announced good news about trading volume
http://uk.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUKN1844941220080618
"Average daily trading volume, a key indicator in the on-line brokerage industry, increased 10 percent from a year earlier while its retail customer assets were up 3.9 percent month over month."
They have more money in the bank and customers are doing a lot more trading and adding to ETFC's revenues.
It's a sign of a solid turnaround plan in motion.
I think that ETFC could shoort to $5 if they can show a return to the core business - meaning zero exposure to the mortgage debacle.
AN - More good news for our puts. Yesterday saw shares tumble in the car industry. Carmax, the nation's largest used car seller, reported a 54% drop in profits and missed earnings by 40%. http://uk.reuters.com/article/ousiv/idUKN1847736220080619
AN is the nation's largest new car dealership and they can't be doing any better. In fact, I think they are doing much worse - their biggest product line is SUVs and they aren't selling.
I previously mentioned that I thought US car sales would fall from 16M to 14M - looks like that's even optimistic. "A survey of dealers...suggested the seasonally adjusted, annualized rate of sales was running near 13 million vehicles in the first half of the month, down from 15.2 million in the first quarter and near 14.4 million in April and May"
Also, put volume has dramatically accelerated on AN.
The combination of more interest in puts and the stock price nearing $12 helps our puts. At the moment, $12 is the resistance point. I think we drop below that soon.
MGM - Down a bit more. I think $40 is their resistance point, but I also think the worst has yet to come for Vegas. But how far down can MGM drop?
I'm thinking $35 is the low. Throughout 2005 & 2006 they bounced around between $34 and $45. Business levels are already returning to 2006 levels.
Business wise, cash is tight. Operating income was running at $450M per quarter until last quarter when it fell to $340M. Then they have to pay ~$160M servicing their $13B debt. They are cash flow positive but it has fallen from $280M a quarter to $180M per quarter.
Outside of weakness as a hotel, a business conference destination and a gambler's mecca, MGM is exposed in the real estate market. Called the City Center and located next to Monte Carlo and Bellagio, it will open in August 2009 with 4,800 hotel rooms and 2650 condos. Talk about bad timing - Vegas is already starting to see surplus hotel rooms and massive oversupply of condos. Meanwhile, construction prices have pushed up development costs from $4B to $9B and counting. The stock price has yet to bake in the impact of lower condo prices (at least $100K lower per condo, or $2B shortfall).
Long term, this is probably a brilliant move. Short term, it will probably force MGM to go deeper into debt and sell off pieces of its empire. I believe that, once folks look beyond the gamblers revenue shortfalls and start asking questions about the City Center, the stock will take another beating.
ZLC - Unbelievably strong, but I have faith in their doom. Blue collar workers are struggling to put gas in their trucks - they aren't buying jewelry. In fact, look at the news on Blue Nile, a major competitor. http://www.forbes.com/markets/economy/2008/06/18/blue-nile-closer-markets-equity-cx_lal_0618markets41.html
"Traffic on Blue Nile's U.S. Web site decreased by 29% in May from the year prior period"
Even Tiffany saw only 6% growth in the US.
It's just a matter of time and we have 6 months.
VMC - From the 80s down to the 60s. VMC is raising $650M to payoff some debt (a bridge loan). It's a great idea to borrow money in a low interest environment, and this will improve their financials somewhat.
But that doesn't chang ethe fact that business sucks today and is getting worse every month. Revenue and profits are down after they acquired Florida Rock. Ooops. And their materials costs are rising rapidly as oil costs rise.
I suspect they drop to $60 next month if they show a negative quarter.
HOG - They slipped 4% yesterday in sympathy with the auto stocks. We've done the due diligence: auto/vehicle imports and exports are down, GM/Carmax reports extremely soft car sales, and financing is tighter. And the working man is cash strapped. Analysts expect only a 6% drop in sales, which seems optimistic: new car sales look to be down 20%.
I see them drooping to the low 30s by next month's earnings release.
NKE - Uggh, this isn't working out. I expected a drop in clothing sales and I was right: US consumer spending on clothes drooped $3B in Q1 this year. Apparently, NKE is immune. Tiger Woods is out for the rest o fthe season, and that may dent sales, but I doubt it really matters. NKE is riding on the Olympics and the gains from international sales being translated into the dollar. The dollar advantage ends in a few months, so that works in our favor. But we really need to see a consume spending pullback, and soon.
AGN - Word is getting out - cosmetic surgery is drooping. (Sorry - couldn't resist)
Not only was this issue featured on the Daily Show, it is starting to make the rounds in the investors corners.
http://biz.yahoo.com/ibd/080613/health.html?.v=1
The article nicely sums up my investment thesis. AGN is all about cosmetic surgery. Almost 40% of their business is botox and breast implants. And they are slowing (despite recent company assurances that all would be fine). AGN is going to weather any downturn because they do have a strong business in eye care (pink eye and glaucoma products), but I think th ebotox projections are optimistic. In any case, a forward P/E of 24 seems a bit lofty, especially given current expected growth of 18% for 2008 and 2009.
I hope to see $50 and we're out.
TRID - It actually traded below $4, almost their cash value. Which means that it could do it again. I am puzzled here. All facts point to a strong market. There are no facts (yet) showing competition, but neither are there any pointers indicating that TRID has effectively gained some new product wins.
ETFC - They have drooped in light of the recent Financial sector concerns. I missed the chance to make a few pennies on June $4 covered calls, but I think next week, after Friday's options expiration, the stock should lift and give us a good opportunity.
Meanwhile, they announced good news about trading volume
http://uk.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUKN1844941220080618
"Average daily trading volume, a key indicator in the on-line brokerage industry, increased 10 percent from a year earlier while its retail customer assets were up 3.9 percent month over month."
They have more money in the bank and customers are doing a lot more trading and adding to ETFC's revenues.
It's a sign of a solid turnaround plan in motion.
I think that ETFC could shoort to $5 if they can show a return to the core business - meaning zero exposure to the mortgage debacle.
AN - More good news for our puts. Yesterday saw shares tumble in the car industry. Carmax, the nation's largest used car seller, reported a 54% drop in profits and missed earnings by 40%. http://uk.reuters.com/article/ousiv/idUKN1847736220080619
AN is the nation's largest new car dealership and they can't be doing any better. In fact, I think they are doing much worse - their biggest product line is SUVs and they aren't selling.
I previously mentioned that I thought US car sales would fall from 16M to 14M - looks like that's even optimistic. "A survey of dealers...suggested the seasonally adjusted, annualized rate of sales was running near 13 million vehicles in the first half of the month, down from 15.2 million in the first quarter and near 14.4 million in April and May"
Also, put volume has dramatically accelerated on AN.
The combination of more interest in puts and the stock price nearing $12 helps our puts. At the moment, $12 is the resistance point. I think we drop below that soon.
MGM - Down a bit more. I think $40 is their resistance point, but I also think the worst has yet to come for Vegas. But how far down can MGM drop?
I'm thinking $35 is the low. Throughout 2005 & 2006 they bounced around between $34 and $45. Business levels are already returning to 2006 levels.
Business wise, cash is tight. Operating income was running at $450M per quarter until last quarter when it fell to $340M. Then they have to pay ~$160M servicing their $13B debt. They are cash flow positive but it has fallen from $280M a quarter to $180M per quarter.
Outside of weakness as a hotel, a business conference destination and a gambler's mecca, MGM is exposed in the real estate market. Called the City Center and located next to Monte Carlo and Bellagio, it will open in August 2009 with 4,800 hotel rooms and 2650 condos. Talk about bad timing - Vegas is already starting to see surplus hotel rooms and massive oversupply of condos. Meanwhile, construction prices have pushed up development costs from $4B to $9B and counting. The stock price has yet to bake in the impact of lower condo prices (at least $100K lower per condo, or $2B shortfall).
Long term, this is probably a brilliant move. Short term, it will probably force MGM to go deeper into debt and sell off pieces of its empire. I believe that, once folks look beyond the gamblers revenue shortfalls and start asking questions about the City Center, the stock will take another beating.
ZLC - Unbelievably strong, but I have faith in their doom. Blue collar workers are struggling to put gas in their trucks - they aren't buying jewelry. In fact, look at the news on Blue Nile, a major competitor. http://www.forbes.com/markets/economy/2008/06/18/blue-nile-closer-markets-equity-cx_lal_0618markets41.html
"Traffic on Blue Nile's U.S. Web site decreased by 29% in May from the year prior period"
Even Tiffany saw only 6% growth in the US.
It's just a matter of time and we have 6 months.
VMC - From the 80s down to the 60s. VMC is raising $650M to payoff some debt (a bridge loan). It's a great idea to borrow money in a low interest environment, and this will improve their financials somewhat.
But that doesn't chang ethe fact that business sucks today and is getting worse every month. Revenue and profits are down after they acquired Florida Rock. Ooops. And their materials costs are rising rapidly as oil costs rise.
I suspect they drop to $60 next month if they show a negative quarter.
HOG - They slipped 4% yesterday in sympathy with the auto stocks. We've done the due diligence: auto/vehicle imports and exports are down, GM/Carmax reports extremely soft car sales, and financing is tighter. And the working man is cash strapped. Analysts expect only a 6% drop in sales, which seems optimistic: new car sales look to be down 20%.
I see them drooping to the low 30s by next month's earnings release.
NKE - Uggh, this isn't working out. I expected a drop in clothing sales and I was right: US consumer spending on clothes drooped $3B in Q1 this year. Apparently, NKE is immune. Tiger Woods is out for the rest o fthe season, and that may dent sales, but I doubt it really matters. NKE is riding on the Olympics and the gains from international sales being translated into the dollar. The dollar advantage ends in a few months, so that works in our favor. But we really need to see a consume spending pullback, and soon.
AGN - Word is getting out - cosmetic surgery is drooping. (Sorry - couldn't resist)
Not only was this issue featured on the Daily Show, it is starting to make the rounds in the investors corners.
http://biz.yahoo.com/ibd/080613/health.html?.v=1
The article nicely sums up my investment thesis. AGN is all about cosmetic surgery. Almost 40% of their business is botox and breast implants. And they are slowing (despite recent company assurances that all would be fine). AGN is going to weather any downturn because they do have a strong business in eye care (pink eye and glaucoma products), but I think th ebotox projections are optimistic. In any case, a forward P/E of 24 seems a bit lofty, especially given current expected growth of 18% for 2008 and 2009.
I hope to see $50 and we're out.
TRID - It actually traded below $4, almost their cash value. Which means that it could do it again. I am puzzled here. All facts point to a strong market. There are no facts (yet) showing competition, but neither are there any pointers indicating that TRID has effectively gained some new product wins.
posted by Andrew at
5:06 AM
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