Tag Archive for Short CRM

Stock Market: Oversold and Overvalued

May 30, 2012 Equities

A tough combination for traders which is why we are on the sidelines at Hedgephone.com — We are fine with a flat year so long as we can find that one high probability trading set up to make a nice 8-12% yearly return from. Currently, the market is still overvalued and over-loved yet as we discussed here yesterday, on a technical basis the market is very oversold.

In this case, we have no real crystal ball except that summer trading is done on thin volume and means very little in general as all of the “big boys” are in the Hamptons. In our view, that’s a fine place to be as the opportunities to trade here are few and far between. We will update as stocks get cheaper — the lower they go the better they become from an investment/value standpoint and the more we become interested in them. All in all, we think the S&P is fairly valued at around $1050-$1100 so we wouldn’t step in front of the current down leg just yet…

In another 20%, I am sure we will have a lot more to talk about at Hedgephone!

For now, consider the following short ideas: These “leaders” could soon become the laggards if this is the start of the next bear market crash for equities.

CRM

ANGI

AMZN

LNKD

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Observations for May 22, 2012

May 22, 2012 Equities

The behavior of traders in the stock market is a lot like that of a flock of migrating birds. The action is random, but coordinated and a little crazy. All in all, the herd is scared and greedy right now, chasing the hot dot and neglecting anything with a PE ratio under 55X. Not that any of this matters to hedgephone readers because you are all out of the stock market or short stocks during the selloff if you are following our market model. Hedgephone has been off line for a few weeks due to some personal business issues with our staff. We have elected to push forward, however, to deliver our readers an unbiased and seasoned view of market conditions.

Currently, we think the stock market remains overvalued by around 25% and that investors would be better served in income producing real estate, timber or farmland, antiques, select undervalued equities, short select overvalued equities, and in cash.

While Hedgephone is a completely free service for readers and is just one guy’s trading idea blog, readers can at least take heart that none of what we do here is influenced by a sell side or paid promotion bias. We may be invested in the stocks we mention here or we may not be.

Current potential shorts:

AMZN

ANGI

LNKD

QQQ

IWM

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Current potential longs:

BRK-A

KO

PEP

VLO

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We will be back shortly… Apologies for delay in content production. We don’t like to rest on our laurels, but at the same time we would rather be right about the wrong stuff than wrong and long!

The sell off may finally be losing steam, but keep in mind stocks aren’t super-attractively priced until around $1100 on the S&P 500 in my view. The same old manipulation pump and dump BS rules the tape but for now it appears the bears have a pretty good hold of the rope.

That said, like a pulled rubber band the market is oversold based on the RSI and could snap back violently at any time. That’s why we remain mostly in cash.

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Time To Short Salesforce.com

April 14, 2012 Equities

“Contrarian” value investing is all about selling what is in favor and buying stocks that are out of favor. We think that Salesforce.com (CRM) is too loved by the investing herd right now and could make solid short sale profits for investors.

While high valuation is certainly not a reason to short a stock, astronomically high valuations are a red flag, and could mean that a given stock is poised to plummet when reality set in and investors head for the exits all at once. Salesforce.com is not only insanely expensive, it also has a few negative catalysts on the horizon that could hurt share prices in the near term. Over the longer term, I expect the numbers to do the talking.

Salesforce.com is all the rage right now. Saying anything negative about the stock is tantamount to blasphemy. In fact, most of the investment community takes any type of bearishness regarding CRM personally. It’s as though we bears, who are few and far between, have insulted a major religion or something!

Look, I know I am taking a major risk by not only comparing the bubble in CRM to a religious phenomenon, but in the end any system of belief that is so passionate as to warrant any kind of beheading in retaliation to a simple insult risks being labeled “inherently flawed.” Stock traders don’t always get along, and as “they” say, “that’s what makes a market.”

read more here: http://seekingalpha.com/article/494781-why-the-salesforce-com-bears-may-laugh-last-and-laugh-hardest?v=1334425465&source=tracking_notify#comment_update_link

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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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Hedgephone’s Favorite Shorts:

March 12, 2012 Equities

ROYL

QLIK

AMZN

SHLD

CRM

LNKD

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Pairs Trading? 2 Stocks to Buy and 4 to Short

February 29, 2012 Equities

When it comes to pairs trading, finding the exact correlation match or going
long the better of two companies doing battle in an industry is a tough strategy
in my opinion. Personally, I prefer buying great businesses at good prices and
shorting poor businesses at overvalued prices in similar industries as a hedge.
Many times, the overvalued business can jump substantially in the short run and
if you are overexposed to that stock your losses can mount up in lightening
quick fashion in a full blown short squeeze. OpenTable (OPEN)
jumped from $40 a share to $110 a share in less than eight months before
collapsing. The stock was clearly overvalued, it was the shorts frantic buying
to cover orders that drove the stock into the stratosphere. It is this example
that shows why using options or a strict stop loss order policy is key along
with strict position sizing limits in your trades.

Most professional hedge fund managers and prop traders limit trades to a
certain percentage of their portfolio, and if I can remember correctly most of
the “Turtles” shot for no more than 4% in any one trade. I think that’s a pretty
good rule for pairs trading — you don’t want to get concentrated in a long and
short portfolio and you have to watch your correlations and industry news. High
short interest/high PE stocks can become the best short investments of all time,
but first the power of momentum and early shorts being forced to cover can
really rip the faces off of even the smartest short. So figuring in our trading
rules, we would come up with a 2% position long in Yahoo (YHOO) and a 1% position
short in LinkedIn (LNKD) and a 1% short
position in Amazon (AMZN) as a pairs trade.
Likewise, we are looking to put 2% into eBay (EBAY) and to put a 1% short
position on in Qlik Technologies (QLIK) as well as a 1%
short position into athenahealth (ATHN). Overall, you are
only tying up 4% of your equity, because most brokerage accounts will honor this
type of trade without margining your account.

Read the rest of this article here:http://seekingalpha.com/article/401131-pairs-trading-2-stocks-to-buy-4-to-short

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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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Against the LNKD Bubble Grain: SHORT CRM Intra-Day

May 24, 2011 www.hedgephone.com/network

also NFLX looks to be breaking down…

We had some great public calls on BIDU, OPEN, AMZN, SINA, YOKU, SIGA, BSQR, and others, so I am not interested in the fallen former high flyers as shorts but I am interested in nailing the stocks that are still near 52 week highs but can’t break above them — IE CRM and NFLX….

These are my favorite intraday short positions… the best way to short them is on big spikes and wait for the Stochastics on the 5 period chart if you have Ameritrade or daily using Yahoo Finance to get into the overbought range and tick back below the upper signal line…                                 NOTE V the entry

Chart forSalesforce.com (CRM)

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