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Stocks: Observations on Goldman, Gulfport, Cisco, and Endo Health Solutions


From the Buzz & Banter: There's a good deal of conviction that a massive move is at hand when Endo reports on Friday.

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The last time Goldman Sachs (NYSE:GS) CDSs traded as tight as they are right now (in mid January), the stock traded at $180. If there's a good-odds bet in the markets (and I say good odds; there is no "sure thing") it's that divergences between credit securities and equity securities on the same financial name tend to resolve in the direction of credit. Someone obviously wants out of Goldman stock (the chart looks pretty horrible) but if the CDSs sustain the gains of the last month, they will drag the stock back up sooner than later.

The news out of the Utica shale so far this quarter has not been very good. Gulfport Energy (NASDAQ:GPOR) reports earnings tonight, and after the recent ramp from the mid 50s to the mid 60s, the setup calls for some caution. I am sticking to my thesis that the Utica companies are in the midst of growing pains, and if prices on outer years' winter futures can climb their way to the $5 range, the estimates for all the Utica gassy names are way understated.

Stifel was out this morning with a "short" trading call on Cisco Systems (NASDAQ:CSCO). I have been long this one from about current prices for a few months. I understand the fundamentals at Cisco stink right now, but to suggest shorting the stock after the company just borrowed $3.75 billion specifically to fund buybacks and pay dividends seems like a tough way to make money.

For the gambling investors out there, Endo Health Solutions (NASDAQ:ENDP) has had some very high conviction bullish activity on near-dated, out-of-the-money calls. The March $85 calls have open interest of almost 10,000 contracts (total open interest for all strikes and all expirations is 37,600) and were bought at about a $2.30 VWAP. That's a lot of conviction that a massive move is at hand when the company reports on February 28. I am not involved.

Twitter: @FZucchi
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Position in GS, GPOR, CSCO.
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