Long: AAPL CHD CMG DOW EBAY FFIV GIS HD INTC ISRG KORS KMB
Significantly Short: XLF QQQ
Overall net short
The Bull Market Is Not Dead
This past week had its ups and downs for me. My ups included getting long AAPL right ahead of earnings around 558, then flipping it the next day for 610. Selling 2/3 of my DOW the day before its earnings was another good move. Those stocks along with a FSLR short provided significant gains that helped offset one of my most asinine moves of the year: shorting AMZN ahead of their earnings. Thankfully, size was minuscule and losses absorbable. My thesis for shorting AMZN was justifiable; they have razor thin margins akin to supermarkets, out of control spending, an absurd valuation (165 P/E), and a “hot” product that sells at a loss per unit (kindle). There was fair chance they would post a loss for the quarter. What I failed to foresee was an accounting gimmick(see zerohedge).
Trading earnings is synonymous with playing table games at the casino, and I will hang my hat on these games for the rest of the season.
Lately, the market has impressed me. In the face of an abundance of skeptics, it has shaken off a significant amount of negative news and continues pressing higher. Continuing claims are the rise, parts of Europe are in 1930’s like depressions, and some Euro sovereigns have been flirting with crisis levels… Only in a bull market is such news completely ignored.
I added some stocks to the portfolio this week.
Chipotle Mexican Grill – CMG is still in an uptrend, P/E is high but justified by the opportunity to expand stores internationally and domestically, solid balance sheet, high profitability.
F5 Networks – FFIV had an exceptional earnings report, company has a solid balance sheet, tremendous growth, and high profitability.
Home Depot – HD is my play on a housing recovery. The stock has been in an incredible uptrend since Oct 2011, plus the dividend is attractive. If it breaks its 20 DMA I will bail.
Intuitive Surgical – ISRG had an incredible earnings call, after a small pullback I decided to pull the trigger. Their monopoly on robotic surgery is so damn appealing, I have owned the stock several times since 2008 and every time I sold thinking I’d booked awesome gains I ended up deeply regretting the decision.
Michael Kors – KORS has a high P/E, but their potential to grow in the coming years with new store openings is phenomenal, Women love this stuff…
Intel – INTC reaction post earnings was not fair in my opinion. I like this company; it has a great dividend, nice margins, good balance sheet & cheap valuation.
Despite my purchases I am still sitting on 71% cash. As these stocks rise I will continue allocating capital towards them.
Trade Ideas For This Week
Short
EWI EWP XLF USO UNG GRPN RIMM FSLR BKS GME BBY
Long
TLT CMG AAPL
I am in a bearish mood, can you tell?
Apple Bruised My Ego
Today was my worst trading day of the year. The amount of money I lost was small, but the damage to my ego was huge.
Under the assumption the S&P would fail to breach its 50DMA, I got stopped out of three asinine trades on the short side. After three strikes, and seeing SPY march higher I figured if you can’t beat them, join them, so I got long. With my portfolio generically long in both SPY and IWM, I started looking around for individual stocks to play.
My eyes immediately drifted to Apple’s chart, which is always fixated on one of my screens. I previously sold AAPL near its highs before the DOJ lawsuit was announced and now it was over $10 less than my last sale. The lawsuit is complete bullshit, DOJ is claiming consumers were scammed out of $100M, even if they’re guilty, AAPL has lost billions in market cap since the announcement.
The shares were trading relatively weak compared to the NASDAQ 100 and I thought it was going to play catch up. When it started ticking up, I started buying, confident it would be in the mid 630′s by the close I made three consectutive purchases at higher prices. Then the shorts stepped in and ruined my party, watching it fade as the market stampeded higher was painful, and my trades were fucking regretful. I made a final purchase near the day’s low to average down my trade price.
I also bought some CMG and M (no regrets there)
I think this rally has room to run, the market will probably make another high. Tomorrow I plan on using the SPY and IWM money to buy some individual names.
Ultimately AAPL will trade higher, and I will be victorious.
4/13 Update: I was defeated this morning and sold AAPL at 617, I am waiting for support around 601-600 to step back in…
Flipping Stocks
This morning at the open I flipped all of the Longs I took on yesterday at the close for a profit. At the moment I am in 100% CASH. I can not justify getting long any stocks until SPY can breach its 50DMA (137.38) on decent volume. I even closed out my successful short sales in GRPN and RIMM, an astonishing number of attractive shorts are getting squeezed today, and I do not want to be next. There is no rush to get into this market Long or Short.
As I am writing this SPY is flirting again with the 50DMA… Watch and see if it holds with conviction.
Summary
Sold CMI MSFT AAPL ORCL DOW
Covered RIMM GRPN
Update
It may be more important to see S&P futures breach their 50DMA, which is 1372.
A Fear Mongering Liquidation
Fear of a European recession, and no mention of QE by Bernanke last night scared the hell out of investors today. While I watched SPY break its 50 day moving average this morning I liquidated all of my long positions (even AAPL) and mercilessly took on a large short position in SPY, which led me to profitability when others saw their portfolios get slaughtered. Around 3:30 I covered my position and started nibbling long on stocks that looked oversold. Going into tomorrow I am slightly long (~ 12.5%) AAPL, MSFT, CMI, DOW & ORCL. Alcoa’s earnings beat may provide the market with a gap up tomorrow, but beware of the fade…
Note: Still short RIMM & GRPN
An Update Of My Buying Activity
This week I opened new positions in the following companies…
TAP - Molson Coors, got beat up after announcing a take over of a european brewer, stock became oversold after concerns they will need to raise cash in order to complete the transaction.
NSC – Norfolk Southern, a solid railroad company I have been watching for a while. Its price action this week in the face of a weak market warranted a long position. Look for them to benefit from transporting the record wheat crop being harvested this year.
SWKS – Skyworks Solutions, A significantly undervalued company in my opinion.
CMI – Cummins, A report that indicated orders for trucks will be weaker than expected created a buying opportunity earlier this week.
LVS – Las Vegas Sands, Intrinsically undervalued, and price action this week warranted a buy. In addition, S&P took them off credit watch.
EBAY – After announcing a new payment system that will compete with Square, stock took a hit and become oversold.
Shorting Ponzi Schemes & Inadequate Smart Phones
Yesterday I bought puts in two companies, Groupon and Research & Motion. An SEC investigation of Groupon is music to my ears. They have an unsustainable business model and had to cook the books in order to flip it to the general public. Andrew Mason is almost (innocent until proven guilty) a common criminal who should immediately retire and play with his dollhouses. All the banks that took them public should be burned to the ground, this disaster will not reflect lightly on legitimate young companies looking for public money. Take a look at their financials and try not to laugh out loud.
Research & Motion simply could not innovate along side Apple. Everyone important has or is jumping ship. I predict it will trade down to the single digits before some bigger stupider company (ie MSFT) makes an offer to buy their crap. Till then it will bleed cash month after month, quarter after quarter…
Cheers,
GG
You Can Not Stop This Rally
Bulls get fed today with a better than expected ISM manufacturing report. The reading for March was 53.4%, vs. expected 53.0% and February’s 52.4%. In other words, the American manufacturing sector is growing and accelerating at an unexpected pace. This report also represents the 32nd month of consecutive expansion in the sector.
My favorite parts of the report are the 2.9% gain in Employment, and the 3% gain in Production.
Over the weekend “China Bears” got punched in the face with a better than expected report on their manufacturing sector. However, there was a conflicting HSBC private sector report that indicated a contraction. I wouldn’t put it past the Chinese government to cook their numbers, but I am not concerned with a “hard-landing” in their economy. Frankly, their Government doesn’t put up with any bullshit, on any weakness they will proactively use monetary and fiscal stimulus to jumpstart their economy. Do you remember how fast they responded to the 2008 financial crisis? They also have tons of room to cut their base lending rate, which hasn’t been touched since 2008.
Apple has officially shaken off the negative news from the Foxconn labor report. The costs needed for any reforms will mostly bear upon Foxxconn. The head of the Free Labor Association, the originator of the report, admitted the infractions are no worse than any other factory in China.
I was buying Apple hand over fist on Friday, after trading out of shares near its all-time high on Wednesday. Today I was thankful for my instincts, and even added to the position early in the morning. Now I am dancing all over the Bear’s faces, again.
Apple shorts do not have a legit case. The Kindle and Droid are not viable competitors. Getting short because it made a parabolic move is insane. Unless you are unaware of traditional valuation techniques, AAPL is NOT expensive. The stock has been in and out of technically overbought levels all year, just because it slipped out last week doesn’t mean shit.
I initiated a trade in Global Payments, like catching a falling knife I snatched a small position at $45.66 this morning. My thesis for capitalizing on their unfortunate circumstances is that the credit card theft was an isolated incident. GPN still has a solid business. Apart from this event, they are an excellent emerging market play on electronic payment processing. By my calculations, the shares have an intrinsic value around $65, and they are technically oversold.
Sold BID, MCD & ALXN. Felt like booking some trading profits
Bought shares and call options in both ORCL & INTC.
Bought Back Some AAPL & ALXN
At prices less than I sold for on Wednesday, recovering a faction of the original positions, if they continue to decline I will continue to add. Still holding my SDS, so I am now slightly long going into tomorrow.
Cheers,
GG
Neutralizing Portfolio w/ SDS
Going into today I was up over 20% since January. For some reason I got the sense to sell some shit today at the right time (ALXN, AAPL, ORCL & CMI). As a result, I was only 30% long by the afternoon.
Then I decided to play even more defense… buying a shit ton of SDS in order to essentially neutralize my positions.
Now I hardly expect to make any money if the market goes up or down. I will use this moment of calm to reassess my strategy and look for clues to where the market wants to go.
Sold ALXN
Price action forced me to take profts, I was lucky to get rid of shares around $92 before its flash crash to $87. Basically one large holder decided to cash out.
A negative Barron’s article was published over the weekend. This may have helped persuade some holders to cash in on profits.
BOT Cummins & Oracle
CMI @ 123.50
ORCL @ 28.85
Doubled Down On ALXN
Decided to double down on ALXN today around $91. This stock has outperformed for as long as I can remember and there is no reason why that should not continue.
Long A Greek Shipper: DSX
This is a little delayed, but I purchased DSX last week. This is the smallest company in my portfolio and the riskiest. Basically I am betting that the Baltic Dry Index has bottomed, or is close to it…