Some Summaries from week of 4/19/15 – $TSLA, $MSFT, $AMZN, $QCOM

Tesla Price Targets Pull Away From Profits: a classic example that momentum stocks really trade on fictional earnings reports. They’re irrelevant, til they’re not.  $TSLA (218)

Wall Street Journal graph of TSLA earnings projections

 

Amazon Reveals Just How Profitable the Cloud Can Be: by Tiernan Ray.  Ultimate conclusion is that Microsoft’s Azure is doing well too.  Which would you rather invest in, $MSFT (47) or $AMZN (445) a cloud provider in a hugely profitable if diminishing cash cow or one “trapped in a retailer.”  Unresolved: is Azure a function of that dying business of companies running on Windows?  Microsoft got other loving mentions in Barron’s as well from the usual spreadsheet watching crowd.

A Recharge for Qualcomm.  Can Jana partners get $QCOM (68) to split off the licensing from the chip business?  This is an article very related to the above MSFT & AMZN discussion so far as shareholders are concerned.

Let’s Take a Short Ride, a Heard on the Street Column from April 18-19 suggested the desirability of a strategy as follows:

bet against the 10% of stocks with the highest days-to-cover ratios, and bought the 10% with the lowest…it would have fared from the start of 1988 to the end of 2012.  The results: a return of 2,917%–almost double the total return of the [DJIA].

 

Shorting high-day-to-cover ratio WSJ chart

 

Notable Barron’s Predictions September 1

The market strategist survey was as usual effectively worthless with most of the analysts predicting a market very close to where we are today, Treasury bills at 1.75 give or take, and without decisive opinions about whether the “fiscal cliff” will be avoided.  Only Goldman Sachs stood out with an end of year S&P prediction of 1250.

Steven Auth of Federated recommended CAT at 84.47, QCOM at 61.20 and Daimler DDAIF at 48.85 (“luxury goods”).  Robert Doll of Blackrock recommended Chevron CVX @ 110.93, ConocoPhillips COP at 56.11, and UnitedHealth UNH at 54.69, Adam Parker of Morgan Stanley concurred on Chevron, Bristol Myers BMY at 32.8, AmerisourceBergen ABC at 38.1

I like the CAT call — 8 p/e also favorably ranked at Valueline — and this is on my watchlist after any market drop but low priced enough perhaps just to jump in.  Continue reading

Large Cap Tech LEAPS on August 31

The following is a list of the current base prices of AAPL, GOOG, MSFT and a few others for comparison including a possibly interesting play with HPQ as well followed by various January 2014 calls.

The mathematical dissection of which options have the best value compared to expected volatility I don’t think gives much of an incremental advantage in selection.  I’ve chosen for example 100 point increments in the strike prices of similarly priced GOOG and AAPL which demonstrates a bit more expected volatility in Apple than Google.

Apple, Google and Microsoft are in the very unusual situation of having immensely strong technological positions and insane amounts of cash.  Hewlett Packard anyone else with a scent of exposure to the PC market (DELL obviously) is also trading at historically low P/E ratios.  It is hard to imagine situations outside the more dire macroeconomic scenarios where both of these companies emerge as big losers (though a re-elected Obama administration that steps up taxation and doesn’t enable a repatriation of foreign cash holdings is sufficiently dire for them to wildly appreciate.)  The asymetric upside is good growth and increasing P/Es could lead to one or both doubling.

Of the three I would feel most comfortable with GOOG as a buy-and-forget play now which is of course an option.  Their market lock in feels strongest with the most innovative (most productive?  We’ll see) R&D and promising new fields to come.

One another play would simply be to get NASDAQ 100 calls.  The grossly undervalued large caps included the above named as well as CSCO and QCOM add up to approximately 50% of the index, though you get BIDU and WYNN and other plays that are not as salient to the thesis: do you feel lonely in the QQQ, Kraft Foods?   There are a number of companies in the index such as Amazon (3.5% of the index and IMHO grossly overvalued) The QQQ closed at 68.16 today; this idea train has already left the station this year but probably plenty of track ahead:

Chart for PowerShares QQQ (QQQ)

This looks a touch ahead of itself going into a volatile September; still, QQQ Jan 14 LEAPS now:

70 – 5.92

80 – 2.29

90 – 0.63

100 – 0.13

This strategy would have fallen short in companies like Microsoft and Oracle and others in the lost decade of stocks 2002-2012 but as the economy generally picks up and if Europe were to return from the brink would pay off big.  For my current positions short S&P if there is a steep downturn in September I would pull the trigger on a strategy such as this.

Proudly powered by WordPress
Theme: Esquire by Matthew Buchanan.