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  • #121
  • Nov 6, 2017 4:12am Nov 6, 2017 4:12am
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  • #122
  • Nov 6, 2017 7:45am Nov 6, 2017 7:45am
Medici - I recognize those charts -- From RealVision, right? Those guys put out some good stuff and their podcast (Adventures in Finance) actually gets some very good guests.

I think both of you raise the prospect of a fascinating paradox: that stocks are overvalued but rising economic activity (or synchronized global growth as I keep hearing about on TV) could keep the game going longer. One of the arguments that stocks are NOT overvalued is because interest rates are so low. It's possible that the coordinated central bank tightening in the coming quarters, along with the changeover of the Fed's chairmanship could lead to faster rises in interest rates that would lower stock multiples. Hard to say what the exact catalyst will be but clearly just going off PE ratio could have you shorting long before the day of reckoning arrives.

So I'm on high alert for a turning point, but as we all know, "The market can stay irrational longer than you can stay solvent."
  • #123
  • Nov 6, 2017 8:29am Nov 6, 2017 8:29am
Quoting InfinitySL
Medici - I recognize those charts -- From RealVision, right? Those guys put out some good stuff and their podcast (Adventures in Finance) actually gets some very good guests. I think both of you raise the prospect of a fascinating paradox: that stocks are overvalued but rising economic activity (or synchronized global growth as I keep hearing about on TV) could keep the game going longer. One of the arguments that stocks are NOT overvalued is because interest rates are so low. It's possible that the coordinated central bank tightening in the coming...
Yes, and agree on all points.

As to stock valuation, yes, zero interest rates justify higher valuations, but how high? Even with zero interest, if you do your discounted cash flows, your investment has to make sense. For large parts of the market, that isn't the case.

Still, as you say, things have been out of balance for a good while, and they can keep being so for a while longer. But not forever. There will be significant turmoil, but perhaps not just yet.
  • #124
  • Nov 7, 2017 2:46pm Nov 7, 2017 2:46pm
Here are three trades i was working on last night. I ended up putting a few of these on (at slightly worse levels than what i have indicated since both DUK and VRSK were up on the day. The charts are a little busy...I used the blank space to embed the options chains i'm interested in either as a hedge or as a speculation.

Also a disclaimer on DAL. This is an odd one... I'm long a small amount from a few months ago, but also speculating on some very out of the money options. There's a good chance i'll lose all my money on those options. Think of it sort of as a disaster hedge... Implied vol goes to the moon, or oil prices spike, or God Forbid some sort of terrorism event.

Charts do not include today's price action, so a little stale...

$DUK - Long w/ 83-85ish stop
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$VRSK - $85/90 stop depending on risk tolerance. I'm buying stock+ some puts
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$DAL - Think some of the calls & puts look cheap. Bias is to be long w/ some deep out of the money "lottery"-type puts...
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  • #125
  • Nov 7, 2017 9:30pm Nov 7, 2017 9:30pm
Quoting InfinitySL
Here's one I'm keeping a close eye on: SMG. Scott's Miracle Grow makes fertilizer, soil, and other agriculture related products. They've also been quietly (or not so quietly depending on who you talk to) been getting involved in the Pot business or at least products tangentially related to weed. As I think legalization is just around the corner, this could be an interesting way to get on that train. Two ways i'd play this from a technical standpoint. Either buy now with a pretty tight stop around $92 (or $90 if you want to give it more room) or...
RE: Post from 9/13 and 10/3...

FINALLY got SMG to break through and close above $100. Might add on w/ a pullback, but for now will just sit tight (Long @ ~$95.5).
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  • #126
  • Nov 11, 2017 12:04pm Nov 11, 2017 12:04pm
Here's another utility name. I'm already long DUK, WEC, and EXC, so not sure how much more room i have to get long, but i might add a small amount.

Daily and Weekly charts attached.
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  • #127
  • Nov 12, 2017 10:40pm Nov 12, 2017 10:40pm
A few breakouts on the weekly. No position in any at the moment.
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  • #128
  • Nov 15, 2017 8:52pm Nov 15, 2017 8:52pm
I'm a little late in posting this one... This was a short I was sizing up last week, but here's the chart as of today (Wed's close, so the current weekly bar only half completed). Interesting breakdown here, also some news on the company that doesn't look so hot. Could be a value trap as earnings decline and PE ratio compresses. They are buying back stock though, so that's obviously a risk to the short trade. I'd probably stop myself out if it rises above $106ish.

No position as of yet...

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Recent news article that probably pushed the stock down a bit...
https://www.buzzfeed.com/rosalindada...r9#.kblWo0dXEz
  • #129
  • Nov 16, 2017 10:58am Nov 16, 2017 10:58am
I never did understand why a company would back its own stock. A Fund or Investment Company, yes in some situations; but a regular company...?

Seems that the stock value could be lifted by paying a dividend with the money that would have been spent buying back stock, and the market would then probably oblige by raising the stock value.

There is one aspect which is that a large treasury holding allows a company to predate others and buy with a share-for-equity swap, but that could be done by simply issuing more shares.
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #130
  • Nov 16, 2017 6:43pm Nov 16, 2017 6:43pm
Quoting Exodus
I never did understand why a company would back its own stock. A Fund or Investment Company, yes in some situations; but a regular company...? Seems that the stock value could be lifted by paying a dividend with the money that would have been spent buying back stock, and the market would then probably oblige by raising the stock value. There is one aspect which is that a large treasury holding allows a company to predate others and buy with a share-for-equity swap, but that could be done by simply issuing more shares.
A share buy-back can raise the stock price because that makes ownership less diluted. Raising dividends may or may not increase share price, it depends on the timing. If a company is considered a growth company raising the dividend could be seen that the company has less confidence in future growth, so instead of reinvesting profits it distributes more to the owners and thus growth investors get out and move on. Of course, not always - raising the dividend could mean the company has overcome some challenges. But a Dividend Aristocrat's or King's share price isn't really affected at all by the increases, because their owners are there precisely for the dividend and they attract long-term value investors, who are usually looking more for a discounted share price. All about the timing.
  • #131
  • Nov 16, 2017 8:05pm Nov 16, 2017 8:05pm
Quoting Exodus
I never did understand why a company would back its own stock. A Fund or Investment Company, yes in some situations; but a regular company...? Seems that the stock value could be lifted by paying a dividend with the money that would have been spent buying back stock, and the market would then probably oblige by raising the stock value. There is one aspect which is that a large treasury holding allows a company to predate others and buy with a share-for-equity swap, but that could be done by simply issuing more shares.
If a company buys back it's own stock, that benefits all the stockholders of the company.
The shares are usually cancelled so no longer "outstanding shares" available for purchase.

Example:
XYZ has 10,000 outstanding shares & buys back 1,000 shares.
If you own 1,000 shares you used to own 10% of the company & now you own 11% of the company.
The EPS (earnings-per-share) will increase just by reducing the # of shares. Higher EPS will reduce the PE (price-to-earnings) ratio which will make it a more attractive stock to buy for other investors which will drive the price higher.
  • #132
  • Nov 18, 2017 7:27am Nov 18, 2017 7:27am
The above discussion is a classic debate in finance. In theory there is absolutely no difference between a share buyback and a corp dividend. The example cited above if you own 10% and they pay out cash equivalent to the 1,000 shares they were to repurchase, you as owner can now use that cash to buy 1% of the company and own 11% of the new capital structure. Alternatively in the share buyback scenario, you can immediately sell that extra 1% and get your cash that you would have gotten from your cash dividend.

The only time the waters get muddied is due to taxation of dividends vs. cap gains. If your government taxes dividends higher than capital gains, then you're better off w/ the buyback. If vice versa is the case (and it seldom is) you're better off with dividends.

I would argue however, that there is an advantage to dividends. In many companies, management awards themselves obscene amounts of stock and stock options. In buying back the shares and increasing the stock price, management can mask the dillution of all that stock they issued to themselves. Another argument I've heard against buybacks instead of dividends is stated as follows: Dividends reward holders and owners of stock, whereas buybacks reward sellers of the stock. In other words, to buy the stock back, someone needs to sell to you...

That's my 2c on the issue.
  • #133
  • Nov 20, 2017 9:19pm Nov 20, 2017 9:19pm
One other item I'd add (not that anyone asked me) but what if a company's stock is overvalued? Why buy it back? I'd much rather (as an owner) they paid me cash and/or issued more shares in time periods when its overvalued and then did share buybacks as the stock is undervalued or trading below book value.

Of course that is sort of a paradox -- When times are bad, companies need all the capital they can get, so they tend to hoard it (thus not buying back the cheap stock) whereas when times are good and they're flush with cash without a care in the world, that is when their stock is (probably) at its most expensive... Classic Catch 22.

Good Luck Trading out there.
  • #134
  • Nov 21, 2017 3:07am Nov 21, 2017 3:07am
There are a couple of Funds that I hold or follow which are buying back stock for exactly that reason. They are under-valued i.e. the current share price is at a significant discount to NAV.

The Strategy Statement (or rules of operation for the company) states the conditions under which the company may buy back its own shares. Regular companies do not usually have such statements in their remit and it is at the discretion of the senior management whether to perform this activity. Funds often have a rule which says something like "if the current price is more than 10% below NAV then..... and shall not pay more than <some trading range limit to prevent laundering>".
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #135
  • Nov 24, 2017 9:47am Nov 24, 2017 9:47am
Here's one I like the look of. Valuation actually seems somewhat reasonable as well...
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  • #136
  • Nov 25, 2017 3:08pm Nov 25, 2017 3:08pm
I had found about 10 pretty nice looking charts, but i'll just post these three. Quite a bull market we're in...I'm keenly aware of how far we've rallied and are due for a pullback but every time i try to short I lose money, so I'll keep posting long setup until I start getting stopped out more on long trades.

$VMI - Weekly - New 7+yr high. Possible inverted head & shoulders, but this is not really my pattern that I trade, just kinda looks like one to me.
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$AMN - Weekly - A pattern i've posted a number of times in this thread, well defined stop loss points.
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$TEO - Weekly - This one is a little extended... would rather buy a pullback to $30 or high 20s, but to me this looks bullish. Maybe half now, half in the very low 30s?
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  • #137
  • Edited Nov 30, 2017 1:30pm Nov 29, 2017 6:17pm | Edited Nov 30, 2017 1:30pm
Sometimes option volume and open interest can be useful in uncovering trades.

Juniper had been beat up for many weeks but last few days was trading higher on very heavy volume. Also very heavy option volume (which i'm attaching below). Note how different the puts versus the calls look. Also note how much volume in calls traded today.

There's a guy on twitter @OptionsHawk who posted a number of tweets on the name. Some of these options could have been 5-10 baggers...Even on a small position size, that's good coin boys.


EDIT: Post-script.. next day rumors of a takeover denied and stock drops back to $27!! Insane...
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  • #138
  • Dec 2, 2017 1:46pm Dec 2, 2017 1:46pm
Related to our dividend versus share buyback discussion....

https://latest.13d.com/cannibalizing...s-c9e06b2fab43
  • #139
  • Dec 2, 2017 4:35pm Dec 2, 2017 4:35pm
Quoting InfinitySL
Related to our dividend versus share buyback discussion.... https://latest.13d.com/cannibalizing...s-c9e06b2fab43
I agree with many of the comments in the article.

If the new tax plan passes the house, corporations won't hire more workers or increase wages with the increased profits. They increase hiring based upon demand for the products they produce and NOT on the amount of money they make. They're not going to raise pay to it's workers as that doesn't increase earnings which is the reason they'll buy back stock. It's "whatever it takes" to get the stock price higher while they're in charge.

Google was criticized years ago when they started getting into businesses which had nothing to do with the internet but looking back they were smart to get creative with all their excess cash rather than buy back stock. I think that's why apple continues to sit on a mountain of cash as they'd rather wait for opportunities to spend big in new businesses even if not directly "tech" related.
  • #140
  • Dec 3, 2017 2:47pm Dec 3, 2017 2:47pm
Here are three charts I'm looking at. Two longs (RDN & TAP) and possibly a short (AYI). With AYI it's hard to say... could turn out to be a great long. I'd wait and see which way AYI develops. No position on any but TAP intrigues me and RDN i basically own a very similar stock (ESNT which also looks pretty damn good on the weekly right now...)


$TAP
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$RDN
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$AYI
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