|
TranceAddict Investors Club @ Marketocracy (pg. 159)
|
View this Thread in Original format
| jerZ07002 |
| quote: | Originally posted by Krypton
Thanks for the comments. A stock can have great fundamentals but be expensive. Not in the sense of a $100 stock versus a $50 stock. But that a $100 stock worth $150 is cheap, while a $20 stock worth $15 is expensive. Even though the $100 seems like the more expensive stock, it actually is the cheaper of the two. Also, bad companies can be very undervalued. Such as Citigroup (C) when it was trading at just $1. I had a rating of "possible bankruptcy" but with an "ultra cheap" valuation on it. It ended up quadrupling.
|
i take it that when you say, expensive, you mean overvalued. why would you recommend someone buy a stock that is overvalued? perhaps i'm not understanding your explanation. it seems that if you pegged C for possible bankruptcy, but said it was ultra cheap, you were playing a purely speculative game on one side (either the grading or the value).
| quote: | Originally posted by Krypton
The site needs some work, I just need to find the time again, as I've been busy with school and finding an internship. But today is the last day of finals, and I'v finally found the internship, so I have 3 weeks off school to work on it. |
congrats on the internship. don't underestimate the importance of free labor (or cheap labor). ;) |
|
|
| Krypton |
| quote: | Originally posted by jerZ07002
i take it that when you say, expensive, you mean overvalued. why would you recommend someone buy a stock that is overvalued? perhaps i'm not understanding your explanation. it seems that if you pegged C for possible bankruptcy, but said it was ultra cheap, you were playing a purely speculative game on one side (either the grading or the value). |
Well, the rating is purely fundamentals, while the valuation is purely on value. You've just given me an idea. I should combine the two. I'll get to work!
| quote: | | congrats on the internship. don't underestimate the importance of free labor (or cheap labor). ;) |
All for Mother Russia! |
|
|
| saluyamo |
I was wrong about AIG falling like a brick :o
| quote: |
AIG reported second-quarter net income of $1.82 billion, or $2.30 a share, compared to a loss of $5.36 billion, or $41.13 a share, a year ago. Adjusted net income was $2 billion, or $2.57 a share, compared with an adjusted net loss of $1.3 billion, or $10.15 a share, in the second quarter of 2008.
|
http://www.marketwatch.com/story/ai...ears-2009-08-07 |
|
|
| Krypton |
I have written a stock analysis report on GameStop (GME). Check it out...
---------------------------------------------------------------
GME has sustained double digit earnings growth since 2004 with a strong correlation in the stock performance. The recession of 2008 has resulted in a disconnect between GME’s earnings curve and its stock price. This indicates an opportunity to buy into GME while its earnings power remains unrecognized by the market. Chief Financial Officer David Carlson has bought in excess of $1 million worth of GME stock. This is an indication that insiders inside the company are bullish. GME is valued at $35.73 for FY2010. With a current price of $22.86, GME is 56% undervalued for the fiscal year. GME’s PE indicates the company is cheap relative to its competitors. Quarterly revenue growth is above the industry average. Gross and operating margins are also above GME’s leading competitors.
http://finance.com/yahoo_site_admin...E.219151238.pdf |
|
|
| Shakka |
| quote: | Originally posted by Krypton
I have written a stock analysis report on GameStop (GME). Check it out...
---------------------------------------------------------------
GME has sustained double digit earnings growth since 2004 with a strong correlation in the stock performance. The recession of 2008 has resulted in a disconnect between GME’s earnings curve and its stock price. This indicates an opportunity to buy into GME while its earnings power remains unrecognized by the market. Chief Financial Officer David Carlson has bought in excess of $1 million worth of GME stock. This is an indication that insiders inside the company are bullish. GME is valued at $35.73 for FY2010. With a current price of $22.86, GME is 56% undervalued for the fiscal year. GME’s PE indicates the company is cheap relative to its competitors. Quarterly revenue growth is above the industry average. Gross and operating margins are also above GME’s leading competitors.
http://finance.com/yahoo_site_admin...E.219151238.pdf |
Who would you say their competitors are? They have nailed the used-game model and people like Circuit City and Best Buy have tried to get an angle into that market to no avail (with Amazon being the latest retailer to try to make a foray into the used game biz). Also, how do you factor in declining hardware sales (see Nintendo's latest quarter for instance)?
I've been on the fence on this name long and short. |
|
|
| Krypton |
| quote: | Originally posted by Shakka
Who would you say their competitors are? They have nailed the used-game model and people like Circuit City and Best Buy have tried to get an angle into that market to no avail (with Amazon being the latest retailer to try to make a foray into the used game biz). Also, how do you factor in declining hardware sales (see Nintendo's latest quarter for instance)? |
Their competitors would be the names you mentioned. Another would be Wal-Mart. Beyond that, there really aren't many competitors. Which puts GME in an industry with substantial barriers to entry. I see declining hardware sales as a blip on the screen. I blame the recession. Christmas should bring a sales uptick. But one thing is certain. GME is undervalued. I bought at $22.60 and I think anything below $28 has some room to move up.
| quote: | | I've been on the fence on this name long and short. |
What are your long/short favorites at the moment? DSX, TNH, WFR, NE, HAL, EXC, MRK are also undervalued. |
|
|
| Krypton |
I think the market has been overbought. I also have to admit that even I was overtaken by the euphoric rise in the market since March. I think that the levels I mentioned at the start of this thread, Dow over 9000, S&P500 over 1000, and NASDAQ over 2000, are more resistance levels than support levels of a new bull market. The technicals looked like a new bull market and it seems that was all I paid attention to. Now that I'm analyzing hundreds of stock's on fundamentals, it seems the market is overvalued. I expect a pullback for the third quarter, and some of the fourth quarter.
I sold my GME stock for a 2% profit in anticipation of the pullback.
Just bought 4 shares of UltraPro Short S&P 500 ProShares ETF (SPXU). For every 1% the S&P drops, this ETF rises 3%. So if the S&P500 drops just 10%, I make 30% profit. It's very close to its 52 week low. For me, this is a no-brainer. |
|
|
| Shakka |
| quote: | Originally posted by Krypton
What are your long/short favorites at the moment? DSX, TNH, WFR, NE, HAL, EXC, MRK are also undervalued. |
Favorite longs: Stocks that go up, of which there are plethora.
Favorite shorts: stocks that go down, of which there are seemingly very few (that actually sustain a downward move, or actually react negatively to negative news).
In all seriousness, one of our best longs has been DISCA. We've been long AAPL since about $95 and really love the headway they continue to make with Macs and iPhones...We are long several other component suppliers to the smartphone market, though they've been pretty volatile of late (SWKS, RFMD, ARMH, etc). IMAX has been a great story, but is certainly not for the faint hearted. Retail-wise, we've had good success with LULU, GYMB, CHS and COH.
Valuation is a tertiary factor at best when it comes to our stock selection. i.e. it's a backward looking metric--stocks are trading at certain valuations for a reason. It's like looking at the pitch in the catcher's mitt--it's after-the-fact. I am not a buy-and-hold person. EMH is a farce, imho. |
|
|
| Shakka |
David Rosenberg has been right on top of this thing for years.
| quote: |
IS THE RECESSION REALLY OVER?
David Rosenberg
Not necessarily, according to at least two officials over at the National Bureau of Economic Research (NBER). Robert Hall, who actually heads the Business Cycle Dating Committee, came right out and said yesterday that the group will “wait for activity to surpass its previous peak” and added that the “committee will have to reconcile positive GDP growth with shrinking employment … I personally put substantial weight on employment, so I may be leaning toward a later date.”
Well, that may have some serious implications for the markets because historically the S&P 500 bottoms, on average, four months before the recession ends and never by more than eight months. By the sounds of what Mr. Hall had to say, the recession may not end for another 6 to 12 months, which may mean that the March low … may ultimately be retested. What the market seems to be responding to is the consensus of economic forecasters because 90% of them believe that the recession is ending this quarter. (Of course, like the dog wagging its tail, the group is taking its cue from Mr. Market; and Mr. Market in turn is taking his cue from them … talk about a symbiotic relationship!)
To repeat, as we said yesterday, we believe that the equity market is early in pricing in a recovery. The S&P 500 has rebounded 49% from those March 9 lows. Imagine how abnormal a 49% rally over a five-month span — it’s unprecedented back to the 1930s. In the last cycle, it didn’t happen until February 2004 — 18 months into that bull phase where again there was tremendous policy stimulus and an oversold low to climb out of. In addition, household credit was expanding rapidly. Even coming into what was a secular bull market in 1982, it took a good seven months to rally 49% — and that was with the benefit of a V-shaped economic recovery. Going back to 1950, it has taken an average of around 18 months for the market to rebound 49% from a recession trough, not five months as has been the case thus far.
Let’s examine what the macro landscape usually looks like at that magical +49% point in the equity market rally:
• Real GDP had expanded on average by 4.5%
• Employment had rebounded an average of 850k
• The ISM had firmed to an average of 56.2 (the lowest print by this juncture was 53.9)
• Corporate profits had recovered 12.0%
• Bank lending rose an average of 5.0%
In other words, the market is way ahead of itself, because, as of the latest data points during this 49% rally:
• Real GDP is trying to make a cycle low
• Employment is trying to make a cycle low
• The ISM is off the low but still sub-50 at 48.9
• Corporate profits are still trying to make a cycle low
• Bank lending is still trying to make a cycle low
We have never before witnessed a stock market rally of this magnitude over such a short time frame; and absent anything more than tentative signs of economic improvement. The only rally of this magnitude was the wild bear market rally ride in 1930, which was followed by a resumption of the decline that finally bottomed 82% lower in 1932.
As we said last week, the equity market right now is priced for 40% profit growth and 4.0% real GDP growth in the coming year. At the lows back in March, we estimate that the equity market was pricing in flat earnings growth for the coming year (since that time, the S&P 500, by our reckoning, has gone from discounting $50 on operating EPS to just over $70). We’re not sure if pricing in $50 on earnings is truly an Armageddon scenario seeing as we were at that level in 2003, but let’s say that a really bad backdrop, especially for the financials, was priced out four months ago; by the same token, nirvana began to get priced in with this last leg up in the equity market that began just about a month ago. At best, the truth is somewhere in between, but it is not at 1,000+ on the S&P 500. Not at this juncture. This goes down as the mother of all ‘show me’ situations.
At any given moment of time, there are four variables that drive the equity market — fundamentals, technicals, liquidity and valuation. When you look at valuation metrics, namely price-earnings multiples, and for all the talk about how we were facing Armageddon back in March, the P/E multiple at those lows were actually nowhere near where they were in the 1930s. In fact, at around 12x, the valuation of the market was actually no better than the average at other market troughs. In other words, the market never got attractively priced enough at the lows, and now we have the most expensive stock market on our hands in over four years.
Compare and contrast that with the corporate bond market, where valuation is measured by the interest rate premium over government bonds, and indeed, if there is a case to be made that an Armageddon scenario was being priced in back in March, it was in the corporate bond market, not the equity market. Baa spreads, which I use since Baa is the median credit rating in the S&P 500, pierced 600 basis points late last year, which was not far off the spread levels seen in the early 1930s. As cautious as I have been over the economy, I doubt we were ever going to see the same default experience we saw in the Great Depression.
What has happened since that time is that those spreads have collapsed to just over 300 basis points, which is still above the peaks of the last two recessions. So, while the depression scenario has been priced out of corporates, this asset class, by my estimation, is still priced for 0% economic growth, while equities are discounting 4.0% real GDP growth in the coming year. In other words, there is still likely more opportunity for bad news to be priced out in the credit markets than in equities.
David A. Rosenberg is Chief Economist & Strategist at Gluskin Sheff, with a focus on providing a top-down perspective to the Firm’s investment process. Mr. Rosenberg has earned both Bachelor of Arts and Master of Arts degrees in Economics from the University of Toronto. Prior to joining Gluskin Sheff, David was Chief North American Economist at Bank of America-Merrill Lynch in New York and prior thereto, he was a Senior Economist at BMO Nesbitt Burns and Bank of Nova Scotia. Mr. Rosenberg has ranked first in economics in the Brendan Wood International Survey for Canada for the past seven years and was on the U.S. Institutional Investor All American All Star Team for the last four years. |
|
|
|
| Krypton |
Nice article. I'm dissappointed because I missed out on the June-August uptrend. I got bullish to late, waiting for the S&P500 to get over 1000. I was bearish for too long changing my mind too late. My lesson learned would be don't time the market. Pay attention to valuations. Valuations will get me in and out of overvalued and undervalued markets. Every time I try to trade on market movements, I get whipped. I should just stick to what I know. Stick to my fundamental strategy. Stop letting CNBC play with my nerves.
I've got new ratings and buy/sell lists based on the 2nd quarter 2009. Check them out. See if your stock is on the ratings list. It's in alphabetical order.
RATINGS
BUY & SELL LIST |
|
|
| Shakka |
| quote: | Originally posted by Krypton
I sold my GME stock for a 2% profit in anticipation of the pullback.
|
Looks like you've got your pullback today. I really wanted to short this stock and missed the opportunity.
Btw, do you trade real money or is this all just hypothetical stuff that you're doing? |
|
|
|
|
