Tag Archive for LNKD

S&P 500 Trading Below 200 Day Moving Average

November 14, 2012 Equities

Hold the phone folks! This could be the big one… I wouldn’t own the market index funds if I were you, instead I would be looking for some short ideas like CRM, AMZN, LNKD, etc… We were pretty “lucky” with our calls so far and we still feel the “Hyper-Stagflation Trade” is due for a serious comeback (IE don’t sell your hard assets but short some stock with a tight stop order right at the 200 Day Moving Average on the SPY 1 year chart).

I may have toked a joint or two in my day and maybe Arizona State is not the Ivy League but I do have a degree in Finance, 10 years plus of financial market knowledge and the wisdom to say “hey, diversify a little out of those crappy slips of paper you own known as technology stocks.”

Look, investing here on the long side in anything other than gold or whatever is probably a total longshot. Given that every single Algo-Bot in the entire world is going to short the market beneath the 200 day moving average, you are fighting the smart money. With that being said, while we feel feel Bernanke is close to running out of bullets, we also feel he is skilled at creating one-day melt-up traps for short sellers. I secretly feel Dr. B loves nothing more than disrupting the natural flow of the stock market and the power that his market manipulations command, but we’ll never know his frame of mind when he decides to rip the faces off of some shorts.

The RSI is too oversold for the market model to switch to short here, though we certainly think the evil robots will send the markets into the abysmal pit of a deep bear market in the medium term. All in all, hold your gold and buy some puts on CRM, QQQ, and AMZN.

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Window Dressing or Mr. Market’s Blessing?

July 2, 2012 Equities

So was last weeks whipsaw Friday some typical “Big Boy” manipulation game which conveniently occurred on the last day of the quarter or are things really that much better on Main Street and Wall Street…? I’ll let you be the judge, but the last day of the month and the first day of the new trading month are usually pretty interesting and enjoyable to watch… from the sidelines… The big action in oil and commodities also suggests that the strength in the Dollar may be waning.

Of course, anything can and will happen in markets and Hedgephone has been admittedly slacking on its duty to keep readers ahead of the tape. That said, it is summer, I am chopping wood on my spread here and frankly am not all that      intrigued by the long or short side of this market. The stock game is dominated by robots and their twenty something hipster programmers today so unless you are an HFT gobot you really have to wonder whether investing in the stock market for the long term is actually an investment rather than speculation….

We still like the KO, BRK.A, PG, MCD, PEP, SEB, COP, CVX type of stuff right now and we would stick with a dividend portfolio like this with covered calls written against the portfolio if we wanted more equity exposure….

Currently, the small Jag fund is 80% in cash (SNOOOOOOOOOOOR) and 20% in silver (hedging our cash? maybe…)

In any event, we will be updating this page more frequently… If you get super bored check out the music section for some tunes or the video page for some good old fashioned mid west conspiracy theory knowledge!

Till next time…. (We are still neutral but leaning bearish based on trading ranges)

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4 Overpriced Web Stocks To Avoid

April 22, 2012 Equities

Most investors think a good business idea equates to a solid long term investment. While this is true on balance to some degree, many people don’t understand that stocks trade in a market and like all markets things are marked up and go on sale for many different reasons, not all of them rational or honest. Indeed, in many markets items are overpriced or sold below wholesale cost because of supply and demand factors. The stock market, despite what efficient market theorists believe, is no different at all. If a certain large trader for a bank or hedge fund wants to mark the tape and “make” a stock he is long or short move in a desired direction the trader can simply push the stock where he wants it to trade. If you are in cohorts with other major players in the market, this type of market manipulation is as easy as third grade math. When ABN and Fidelity decide that XYZ should trade for X one of the institutions simply places the bid out there and the other institution can move in behind the bid with more buy orders to “beef up” the tape even if that institution doesn’t really want the stock in question. While this type of “bad boy” trading is technically illegal, it happens all the time and in just about every equity imaginable. What astute traders have to learn is how to decode a “promotion” or a “pool” in order to find out when the party ends and the stock in question is going to blow up.

With web 2.0 names, the key is to stick with the smaller players and trade from the short side. Wait until the issue becomes extremely overbought on all chart time periods from the 5 day to the one month to the one year and short small amounts with tight stop losses. When a bubble finally pops, you have to be in it to win it from a short selling perspective and a bunch of tiny losses can be made back and profits reaped by holding short with tight stop orders in place.

Another technique is played out using options. Many shorts find an overvalued and over-hyped pump to short but constantly get stopped out right before a massive crash. The traders in these think that nothing can be done to short such momo darlings and give up with losses because they either lack the time or discipline it takes to trade with the trend in the stock. Waiting for the right entry point is key, but another strategy is to buy call options in the same notional amount as the shares you are shorting. For example, you may think Salesforce.com (CRM) is going to blow up so you short 1,000 shares and buy 10 slightly out of the money or in the money three month out call options on CRM as a hedge. If the stock moves higher, you can sleep easy knowing that the call protects your risk and that your max loss on such a position is around 5-7% depending on your strike price.

Read the rest of this article here:http://seekingalpha.com/article/514431-4-overpriced-web-stocks-to-avoid

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Hedgephone Says: “HEDGE”

March 28, 2012 Equities

       The time is here to lock in gains and hedge your portfolio risks. Even though this rally could still have a few percentage points left to run, we think the time is right to take much of your equity long exposure off of the table and to wait for a meaningful correction in equities. While “timing” the market is difficult, valuing the market based on CAPE or the Shiller PE ratio makes a good deal of sense. Right now, profit margins are higher than they have been in thirty years and profit margins are generally mean reverting. Granted, the rise of the internet has become a source of higher margin revenue for companies but the general theory of mean reversion when it relates to profit margins is pretty sound.

All in all, only the most risk hungry speculator should own stocks here unhedged after a 15% or so rise in the Nasdaq 100 so far this year. We think that the market is poised to repeat last year’s timultuos summer of discontent and are looking to short some things here including but not limited to Salesforce.com (CRM), QQQ, Amazon.com (AMZN), LinkedIn (LNKD), Dunkin (DNKN), IWM, MDY, etc…

On the long ledger, consider holding GOOG calls as a hedge against your other internet stocks as well as Dow calls for a “long hedge” against your net short position or fully hedged position in stocks. While it is okay to own some stocks forever, we think that the stock market is at least 35% overvalued at current prices and that it is certainly time to sell stocks hand over fist.

Buy low and sell high is the fundamental tenet of becoming a good stock market investor. Right now the market is too high for us to be anything besides extremely cautious when it comes to equities. That said, some investors with a long term view should simply add on the way down or remain invested in dividend paying stocks. Warren Buffett now gets his original investment in Coca Cola back every single year thanks to KO dividends.

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Hedge Phone Track Record; Why You Should Care…

January 2, 2012 Equities

Check out these short picks from Sept. 9, 2011 at Hedgephone:

Short:

SINA: -40%

CROX: -45%

CRM: -33%

AMZN: -20%

LNKD: -40%

IWM: -15%

http://seekingalpha.com/article/292806-8-overvalued-and-broken-momentum-stocks-to-sell-short

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6 Investments to Sell or Short Now

December 19, 2011 Equities

       While the stock market is well off of the 2011 lows set in August, the market is by no means a sure bet going forward. While longer term, I believe the stock market is pretty unloved and over many decades I expect the markets to rise 5% or so per annum at the very least. In the short run, however, I see many stocks that I would consider short selling here and while bargains abound long-term investing can take, well, a very long time to pay off. By selling near-month or quarterly bear call spreads on these 6 investments, investors can make some serious money for current income needs even if a bull market should set in for stocks in the very near term, which I believe is rather unlikely given the moving parts involved in the European crisis in the modern age of global sovereign debt realities.

       With the shaky economy not showing a whole lot in the way of green shoots, investors may consider selling call spreads and buying put spreads (I would be selling near-the-money calls and buying out-of-the-money calls and would be buying in-the-money put options and selling at-the-money put options or simply selling near-the-money call options and buying calls at a 30% premium to current prices instead of directly shorting something). When shorting index funds, it often pays to do your business rather quickly. When you are sitting on profits, feel free to take them off of the table.

Read the rest of this article, at SeekingAlpha:

http://seekingalpha.com/article/314772-6-investments-to-sell-or-short-now

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Market Hanging in There… Still Risky

October 26, 2011 Equities

for now, but there is not really a compelling reason to be overly bullish on stocks compared to gold, which has markedly outperformed the equity markets for the past two sessions and for the entire year. In other words, I can’t see the averages climbing further in the short run given the headwinds, but anything is possible. For now a neutral stance is fine but the TA still looks more believable on the S&P and Dow Jones than the Nasdaq. Amazon blew up a little today so if you followed the recommendation made on the evening of October 24th, shorted the futures and then shorted AMZN, CRM, QQQ, and LNKD, you have made a sizable chunk of money. The trade may last for weeks or you can take it off with a profit. If I were still trading full time I would say take off half of your position to 2/3 depending on your risk tolerance if you haven’t done so already. Market Mode = cash and gold

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Conversation on Seeking Alpha Regarding CRM and LNKD (My Two Favorite Shorts)

September 29, 2011 Equities

West888

“Wow could you get any further short innovation? These companies are the three bright spots on a very beleaguered economy. Companies that are actually hiring 20% a year. Companies that are investing in communities, building campuses, attracting talent. So your investment thesis is that you don’t like the current quarter results for companies with revenue growth over 30%? How does it look when you take a 20 quarter view? Do the numbers on the companies work then, when the growth subsides and the companies reach a reasonable market penetration like $10 billion a year?”

29 Sep, 11:03 AM!
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Hedgephone Comments (901)

“innovation” — such an over used buzzword. I call it shorting mania and buying panic…

Netflix is a perfect example of when “innovation” meets reality and valuation….

Valuation met innovation in a dark alley, and valuation beat the piss out of innovation… I’ll take valuation over “innovation” any day of the week.

29 Sep, 11:18 AM! Report Abuse0

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westwest888 Comments (38)

“So you should invest in things you know, like paper. Scott’s makes the same amount of paper every quarter, they pay a nice dividend, and you can take your money and put it in 10 year treasuries at 1% or find other investment opportunities with it. I think a paper company is not growing and owes it to their shareholders to give them their money back over time.

I don’t understand how YOU would run those companies to maximize shareholder value. Let’s presume if you didn’t invest in R&D you could return a 20% after tax profit. Do you really want that money back in this investment climate? Or would you like a bunch of really smart people to write more software, invent new services, and build out new infrastructure? Who would liquidate when you have momentum?

NFLX sells a product for under $10 with no contracts to consumers. Two of the companies you listed above have lots of enterprise customers on multi year deals with support and customization. Every 3 months they get an email that new features have been added no extra charge, so they’re happy.”

29 Sep, 12:02 PM! Report Abuse0
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Hedgephone Comments (901)

Hi West,

I think the important point to note is that my articles on short selling aren’t shorting the business but merely the stock.

I agree with you that growing a business for the long term is the goal of any corporation for the maximization of shareholder wealth is the ultimate goal of any legitimate CEO.

That said, there are environments where the paper CEO should return maximum cash to shareholders if, for example, that company sees bad times ahead and slowing sales volumes. In that particular case, paying out a large one time dividend and liquidating the firm would make a good deal of sense if the shares of the firm were undervaluing the assets on hand.

If the shares were markedly overvalued from a liquidation perspective, the company should issue stock or sell the company. Of course, valuing any business is more art than science but mainly I agree that spending on innovation makes a good deal of sense depending on future business prospects, the economic backdrop, and competitive forces.

So in all, I am not saying that an overvalued firm is making a mistake in spending money in R&D, but if I were a stockholder I would prefer the company to issue shares at an overvalued level to pay for that R&D or to sell the company at an inflated price to maximize value.

The reason issuing shares to fuel growth makes sense for an overvalued business is that the capital can be used to acquire undervalued assets, boost R&D spend, pay dividends, or generally shore up the balance sheet to “catch up” to the market valuation…

In all, I see nothing wrong with the way these businesses are operated. I am simply looking at the macro picture and trying my best to find issues that the general public, who is by and large half educated and too trusting, will overpay for in the stock market.

When things get ugly is when the managements of overvalued companies try to defend their stock valuations (ala a certain http://bit.ly/89UJPz poster/CEO who will go unnamed) and advertise their future prospects to investors when they know deep down that growth expectations for the business are simply too high.

LinkedIn is an example of this in that the stock is markedly overvalued yet the CEO is making TV appearances, the President speaks at their HQ, etc… When government starts getting involved in touting overvalued investments you get the dual risk of fascism and the rage of the common man who loses money on said equity and winds up blaming capitalism instead of the collectivism or socialistic agenda that such a move was intended to deliver.

While I believe these companies are innovative and are driving “good” things in the capitalistic market as far as profits for their management teams, I feel they should all issue a ton of stock and use that cash to employ the R&D teams as you suggest. While this may not be good for existing shareholders in the short run, it will cool off the bubble for the shares and will create longer term value for the stockholders in aggregate. In other words, for these tech firms, the 20% going to R&D is better but a manager better serves shareholders by spending this money from a share issuance than from organic earnings when a stock is 50-75% overvalued as I feel all of these admittedly “innovative” firms are at present.

Just remember, ten years from now there will be a whole new set of innovative businesses and industries and at the heart of every business endeavor their is always disruptive change and new business models creating innovation. In other words, from the investors perspective finding low risk high uncertainty opportunities in your Scott’s paper example may be a better investment than a high risk high return investment in a bear market — bubbles tend to pop and people get hurt badly when they do. Better to take your medicine and issue stock down to the sleeping point so that over the long run your shareholders retain their capital

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3 Overvalued Stocks to Short

September 28, 2011 Scams

Let’s be frank, this week’s announcement that the Fed is tracking anyone who says anything negative about the central bank on the blogosphere has huge implications for certain stocks and the overall free market. If the conspiracy folks are right, the powers that be have been, well, manipulating the socks off of the short sellers in equities and the metals markets lately. In any event, it’s clear that nobody remembers the tech bubble these days. If they were old enough to remember the crash they wouldn’t touch many of these high flying web names at current valuations.

If you listen to the kids down at the Occupy Wall Street protests, Alex Jones at www.infowars.com, or Ron Paul you will here that Wall Street interests more or less run the government at this point and have created massive scams to part people from their wealth. It’s pretty obvious that America has become far too obsessed with the markets versus, for example, localized subsistence farming.

When it comes to the following three stocks, I think some truth exists in such a “conspiracy theory” — why are these stocks so insanely overvalued? The markets are clearly not efficient and the idea that LinkedIn (LNKD) is 40X better than AOL (AOL) simply doesn’t pass the smell test, just as Netflix (NFLX) at $300 didn’t pass the smell test either.

http://seekingalpha.com/article/296404-3-overvalued-stocks-to-sell-or-sell-short

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New Article on Shortselling

August 19, 2011 Equities

       Selling a stock short is controversial and is also a tough way to make money for the most part — betting against a company that investors are enthusiastic about is never easy, but in a market that looks to be in a one-time stimulus created bubble, short selling overvalued pump-job growth names that Wall Street cheerleaders love may be the only way the common investor can hedge their portfolios against permanent capital loss.;

In my interview with business psychologist Iris McLister, we discussed short selling in detail.

“Many Americans feel that shorting is cynical, that the act of short-selling is synonymous with withdrawing support. I don’t think it’s an uncommon standpoint for Americans to have, right? As if short-sales are somehow un-patriotic, akin to going against some perceived civil duty. You’re not a villain and you’re not taking advantage because you are capitalizing on a system that is inherently flawed. You can’t exploit something that’s built on unsustainable tenets. I just can’t find fault in your playing the system because the only thing you can do to profit is what you are doing. You are making sure the system is working for you. If you sat back and were idle and worrying about your loyalty to this country, you wouldn’t be getting anywhere at all. It’s not in our control right now.”
http://seekingalpha.com/article/288492-8-potentially-overvalued-stocks-to-sell?source=yahoo

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