Wednesday, February 24, 2010

Huge Bids On Citi

Here's a short note on Citi (NYSE: C) yet again. Has anyone else noticed the huge bids on C. Multiple times I've noticed bids to buy 10+ million shares through out the day. This has happened on multiple days. That's a lot of shares. I've read a lot lately about this person and that person buying C and it seems to be ongoing.

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Some Stocks Just Aren't Worth The Risk

Look out below for Stec (NASDAQ: STEC), they had a predictable 4th quarter, but forecast a horrendous 1st quarter. The stock got killed after hours and who knows where it lands in the AM. The signs were there for anyone looking. High beta, small float, and extremely high short interest. Looks like Fuel Systems (NASDAQ: FSYS)!

Don't underestimate the ability of hedge funds to push down stocks they already have a large short position in. STEC's short interest was near 50% and the float was only about 26 million shares. That tells me that 'they' were going to knock this stock's block off regardless of what they had to say. Also, they did have very bad news.

Until we have new rules in place to curb short selling and clean up the naked short selling, we would rather avoid stocks that are in the cross hairs of hedge funds.

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Friday, February 19, 2010

Not Phased By The Fed Raising The Discount Rate

How is the Fed raising the discount rate bad? This talk about who knows what they'll do next and companies not investing. Don't be ridiculous. This is a good sign and falls in line with what we've been hearing from key companies. The economy is on the right track and we'd be buyers of any crazy sell off.

We still have our eyes on Sierra Wireless (NASDAQ: SWIR). It's down hard, but we think it'll go lower. Recall it was a member of the Model Portfolio, but we sold in Jan. We're also starting to take a hard look at Stec (NASDAQ: STEC). The sell off has been brutal in that stock, but it's a good company with a good product. Still watching both. One more, the National Bank of Greece (NYSE: NBG). The whole Greek tragedy thing is over done.

So what's the deal with China. Have you noticed that market has been quite weak for some time now.

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Tuesday, February 16, 2010

Are Fundamentals A Thing Of The Past?

Anther big up day in the market today with nice buying all around. So what changed from 3 weeks ago to today? Not a lot. Just a few weeks ago the market was in the tank and we were supposed to be worried, and now? Commodity related stocks are back in vogue see Freeport (NYSE: FCX), Cliffs (NYSE: CLF), US Steel (NYSE: X) and Alcoa (NYSE: AA). No fundamental change, just change in sentiment, or should I say change in what the models in the computers think.

With 60-70% of the volume being the result of high frequency trading, you can't always expect reason to prevail in the short and intermediate term! I keep hearing that we have to trade a different way now. I say don't trade, but invest instead. Here's something to think about. Most anything you went long a year ago is higher and most anything you went long 6 months ago is higher.

My point is that fundamentals aren't dead, but the noise makes you think otherwise. I find I do my best thinking and make my best investment decisions when I do either of the two; 1) turn off the tv and put down the paper, 2) do the opposite of what the 'talking heads' say/suggest I should be doing with my money.

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Thursday, February 11, 2010

Cheap Bet On Citi Or Money Wasted? Updated Again

We can't help ourselves over here with our bets on Citi (NYSE: C). We like the options market for this. The 2011 and 2012 calls look too good to pass up. We've concentrated in the 5s, 7 1/2s and 10s. Our strategy basically rests with our belief that the company is buying back shares and will continue to do so until the number of shares outstanding is under 10 billion along with the fact that during normal times banks are among the most profitable companies on the planet factors in to this also. By the way, those who still think Citi and BofA are going under, that scenario has been taken off the table. Yes, their balance sheet looks bad, but every realtor I speak to says housing is coming back.

I don't believe the housing market is really coming back, but I believe big bank owned homes are being slowly spoon fed to us which artificially supports prices. If banks put their entire portfolios on the market at the market price it would be like the 'for rent' and 'for lease' signs I see everywhere.

Those calls look cheap considering the upside. A few hundred dollars bet might return a lot of cheddar! Remember, options aren't for everyone, in fact they're just for a very few with a stomach for risk. The stock looks like a good play as well. At about 3 bucks the downside is minimal, but the upside is huge.

Looking for more proof that others see it our way. Look who's buying. Some of you are probably familiar with the name DFA, well they're buying too and a lot. Have a look here. They added to their already large position and now own about $173 million worth of Citi. JPM, CalPERS, and Susquehanna feel the same way. Although I don't put too much faith in to what CalPERS does.

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Wednesday, February 10, 2010

Stormy Days In The Markets

If you're a holder of Baidu (NASDAQ: BIDU) you're a happy camper. On the other hand if you're a holder of Sierra Wireless (NASDAQ: SWIR) then you're an unhappy camper. Recall SWIR is/was a member of the 2011 Model Portfolio, also recall that we sold it in January over $11. SWIR is still a great company and will make it back, but this was anticipated, as SWIR and Novatel (NASDAQ: NVTL) are never far apart for long.

So how about that BIDU. Less than a year ago it was just over $100, now it's moving in on $500. That one is too hot to touch.

A couple of more stocks which have us puzzled are Stec (NASDAQ: STEC) and Fuel Systems (NASDAQ: FSYS). Once high flyers, they've been beaten down. We've started sniffing around them, but these two are extremely volatile so we need to proceed with caution.

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Tuesday, February 9, 2010

Hartford and Lincoln

Please don't try to make sense of today's action. Hartford (NYSE: HIG) was down hard, while Lincoln (NYSE: LNC) was up big. Both received TARP and both had solid quarters, although HIG's quarter was huge. Just traders trading, no real reason. For those that don't know, HIG is a favorite of hedge funds and other short timers.

We think this presents a great buying opportunity for HIG. Think about this, book value near $40, forward PE 5.5, and one assumption they made that I think is rather conservative a 9% return on the S&P.

Short term this is a day traders dream. Long term, and investors dream.

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Monday, February 8, 2010

I'm Wondering About Citi

I look at all those shares (28 bil) and I look at the stock price (3.15) and I have to wonder, is Citi (NYSE: C) buying back in here? I ask that because the stock price has behaved strangely on some big down days for the market. It's actually stayed flat to up. Also, the company has to know they need to buy back and cancel a lot of shares.

The company is in a tight spot. They have to disclose material events, like large buy backs, but they can't very well come out and say we're buying back 10 billion shares because the stock would go through the roof. This depressed stock price represents a prime time opportunity.

Here's an idea, you can buy the 5s, 7 1/2s, and 10s calls for 2011 and 2012 on the cheap (few hundred bucks) and if we're right about the covert buy back, in a year if we're right - wow!

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Thursday, February 4, 2010

OUCH!

It's been a while since we've been beat like that. So what are we to think? Usually when we get a big down day like this, especially toward the beginning of the month, it's bad for weeks afterward. But usually the preceding weeks were big up weeks, so what now?

What really went on today was more computers selling. I say that because it looked like a year ago. Every asset class was down hard - metals, grains, equities, energy, fixed income, the sky and the stars too. Everything except the dollar and by proxy, treasuries. That's a sure sign that not much thought went in to the selling, which means someone's computer program did it.

How do we play this? We're taking this as an opportunity to put on some long term positions we've been looking at from a distance and adding to others. You know the names (HIG, DOW, etc.), we've talked about them enough. In six months we'll all look back and comment on what a great buying opportunity.

By the way, all this talk about the jobs report spooking the market, give me a break. Who cares if the jobs number is up or down 20, 30, 40k instead of zero. You don't really expect a bunch of economist to get the number right on the button. Things are getting much better and that's a fact. Companies are growing the top and bottom lines and are optimistic about the future.

By the way, if you're not leveraged, then days like today mean very little.

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Tuesday, February 2, 2010

Previous Poll 24-31 Jan

When asked, "Is it manipulation to buy or sell just to move the stock versus buying or selling to take part in the future movement?" 87% said "Yes" and 13% said "No". So there you have it. We're not surprised, as most people think the market is rigged these days!

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The Vix

About This Blog

Where we rant and rave about the market and of course give our opinions on stocks we love or hate. We're not advisors and urge you to conduct your own due diligence.

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