Saturday, January 30, 2010

Thursday, January 21, 2010

RMBS Valuation

Okay, I took a shot at valuing RMBS one year from now. I start with a premise from Ford Equity Research that RMBS trades in a band from 6.27 times trailing 12 month sales to 25.12 times trailing 12 month sales. I took the midpoint of that band, 15.7, to use as my multiple. So, based on my "back of the napkin" calculations, RMBS should be a $32 to $64 stock JUST BASED ON THE SAMSUNG DEAL ALONE. This does not count a potential settlement between Hynix and/or Micron. I think RMBS is a serious deal below $25.

Wednesday, January 20, 2010

Rambus a Steal Under $25

I bought a pretty significant position in Rambus (RMBS) at the end of the day today. It is a special situation trade that I think may be pretty huge. The company is FINALLY getting results out of a decade long court case against a cartel of DRAM makers that have infringed on Rambus' patents. Today, the news came out early of Samsung's settlement and I didn't really have time to digest it until later in the day which kind of sucked because had I realized the gravity of the situation, I would've bought immediately. The Samsung deal basically doubles RMBS trailing twelve months of revenue by contributing $25 million PER QUARTER for the next 5 years! ON TOP OF THIS, Rambus gets another $200 million in cash plus Samsung invests ANOTHER $200 million by buying stock at $20.88 per share (which is a damn good price for Samsung) and it definitely puts a floor under the stock. I was shocked to get the stock under $25 at the end of the day. With the Samsung settlement alone, RMBS is probably a $30 to $35 stock.

However, I couldn't help thinking that this settlement now opens up a wellspring of settlement opportunities for RMBS. The other two companies involved in patent infringement are Hynix (a South Korean Company) and Micron. Tonight, I was doing some more research when this link came across the wires. Hynix is saying that they are now "open to settlement" outside of court. Wow! So now, the question is when will Micron fall?? Will there be other settlements? If you want to read more about a gabillion other companies that are probably also infringing on RMBS patents, there are some good posts over on the RMBS board on the web site.

L-1 Identity Solutions

Took a small loss on this one last time. It's been a bit whippy in this bullflag, but I think it's ready yet again.

VIX Calling a Top as Well?

Medium Term Trend Change Upon Us?

I am all cash as I type this after pulling off one short scalp this morning on the $ES_M (S&P Emini March Futures contract) for +4.25 points. Evidence seems to be mounting that this rally is running on empty. The dollar is looking stronger, equity leaders are taking it on the chin today, money is flowing to the 30 year treasury bond, volume is pretty strong to the downside, and volatility is increasing. Last but not least, the NYSE $TICK registered it's 4 worst half-hour tick readings this morning (year to date).

I've called market tops before and been burned, so I'm not going to do that this time. I'll just sit this out for a while. If I miss a big move to the upside, so be it. The definition of a market top implies EXTREME volatility. I LOVE leveraged instruments such as options and futures and they are great for capturing quick gains during breakouts and trends. However, as someone who uses a lot of leveraged instruments, I can get crushed if my portfolio gets in too deep. If there is ANYTHING i've learned over the past 14 years of trading, it's that MARKET TOPS AND BOTTOMS CAN KILL. Minimal trading for me until the market reveals it's true self.

Wednesday, January 13, 2010

Wynn Resorts (WYNN)

Bought some $70 Feb calls at the end of the day. Looking for a pop to new yearly highs in the next couple days. No head-fakes please.

L-1 Identity Solutions

Tuesday, January 12, 2010

Gold Takes a Hit While Dollar Treads Water

I hacked out some gains trading one gold contract today. Not bad considering all my trades were long and gold took quite a hit today. The dollar index threatened to break yesterday's lows during the morning hours, but then firmed up later in the day. In my opinion, the move in gold did not make sense in relation to the move in the dollar. THAT, ladies and gents, is how you know that options expiration is around the corner! The SPDR Gold Trust (GLD) is seeing 2X average daily trading volume, with 461,000 contracts traded and put volume representing about 53 percent of today's activity.

Monday, January 11, 2010

Trading Tendencies in Gold

I owned one contract of $GC_F (February Gold Futures) at $1140. I sold it this morning at 8:21 AM EST at $1160 because I've noticed a "trading tendency" that keeps re-occuring *almost* every day since gold bottomed at 1075. Gold gets ramped up in the low volume off hours and then sells off during the high volume market hours. This is a tactic used by professionals to make it hard for an amateur to buy into a security. Even though gold futures are traded almost around the clock, it creates a situation where the professional essentially gaps the opening, shorts a bunch of contracts, and then gradually converts his position to net long by the end of the day. Then, the next morning he sells his longs and gets short, and the process begins all over again. I bought back into $GC_F at 1:22 PM EST today at 1152. So, I'm trying to stay long the overall trend, but also exploit the tendency. My overall target on gold is 1300.

Like I said, it's a "tendency" and it doesn't happen every day, but keep an eye out for it! As most traders know, Gold futures are probably the single most tricky vehicle to trade so watch it!

Here's a chart of $GLD. Notice how, today, $GLD bounced off the 50% retrace of this latest 4 week pullback.

Sunday, January 10, 2010

FinViz Screen for Profitable $5 to $10 Stocks

I like the FinViz site very much. Most of the time my ideas come from screeners such as FinViz and then overlaying technical analysis on top of those ideas. That way, I ensure a value component to my technical trades.

Here is a good screen that I use on $5 to $10 stocks with great potential for growth. Notice that 5 out of the 10 stocks are Chinese.

Watch List for Week of 1/11/2009

Friday, January 8, 2010

2010 Trends to Watch - Research Notes

Here are some of my notes from a recent research session I did. My goal was to identify potential trends and tradeable stocks in 2010. Enjoy....

Natural Gas – nat gas is definitely part of the near-term solution as it is VERY abundant in the U.S.
Evidence of Adoption
Town and City Bus Fleets already in conversion process

Carbon Pricing – storing and capturing CO2 emissions.

Growing Population Growth
Demands on Food, Clean Energy and Clean Water

Stimulus Money – only one quarter (as of this writing) has been spent.

Power Grid
Quanta (PWR)

Security and Protection
Level 3

GSI – recently took a hit for issuing more shares. June $5 calls look good. Expects to earn 0.14 this year but S&P expects 0.90 in 2010.

LFT - #1 developer of banking software in China and #2 developer for insurance industry. Also just moved into the securities industry.

PWRD – I know the story here. Entertainment Software. Great margins and products.

Government Unwind – no one really wants to loan the U.S. gov’t money at 3.4% anymore, AND, the gov’t has been keeping rates artificially low to stimulate the housing market. This artificial stimulation should come to an end soon, thus rates should go up. Also, as demand picks up, inflation should rear its head and the gov’t will need to raise rates to combat it. TBT (ultra-short 20+ Treasury Bond) is an ETF that moves in the opposite direction of bonds by a factor of 2. So, if bond PRICES fall 1% as rates go up, then TBT should go up by 2%.

Switching From U.S. Consumer-Centric growth to multi-polar growth – Genius Mohmaed El-Erian says that this should happen over the next 5 years and things will be rocky over the transition period.
The average investor needs to look beyond the U.S. and be wary of inflation.

Gold – gold is doing what it’s doing because it’s bringing together people who are worried about all kinds of things: people worried about inflation, geopolitical risks, and the dollar.

Novartis – growing revenues at twice the clip as the industry and they just hired Jon Symonds who was at Astra-Zeneca and was very good at cutting costs. Novartis is bloated but growing revenues fast and just had 13 new drugs approved by the FDA over the last 3 years.

Ritholtz – Arch Coal; entire coal group. Gannett (GCI) and New York Times (NYT)

Big Companies with Strong Balance Sheets that have foreign sources of revenues – IBM

About Me/Disclaimer/Philosophy

Trading since 1996, it NEVER leaves my mind which is a curse and a blessing. I trade stocks, options, and futures.