Cart (0)
business newsBuzz on the Street: Tech Lags as Stocks End Week Lower
Some of this week's most insightful and timely vibes.
PRINT
Note: Some links may require Buzz subscriptions.
Monday, April 11, 2011
Trading Idea: LCRY
David Dispennette
Lecroy (LCRY) manufactures Oscilloscopes and Global Communication Protocol Analyzers used to measure and analyze electronic signals. The Electronics Scientific and Measuring stocks have been gaining attention lately on the strength of stocks like IPG Photonics (IPGP), FARO Technologies (FARO), Measurement Specialties (MEAS), and Bruker Corp. (BRKR).
Lecroy’s revenues have been accelerating lately, rising 25%, 35%, 40% and 45% during the last four quarters. Earnings are expected to increase 182% this year and another 21% next year to $1.33 a share. This growth is probably why institutional following has increased over the last few quarters.
Traders could focus on a move above $13.50, as volume could accelerate from there pushing the stock toward the $15-16 level. Investors could establish ½ a position here and add the remaining half on a pullback toward the $12 area with a stop set at a close below $11.50.
For more from Dave, take a free trial to The Stock Playbook
Media Stocks Update
Steve Birenberg
Overall, the tone of my firm's trading this month has been to get more cautious, bringing the net long down to the lowest point this year. Here is a recap of our trades in chronological order.
After adding a short in Cinemark Holdings (CNK) and a new long in Valuevision (VVTV) on April Fool's Day, we took some profit in our position in UTStarcom (UTSI). The stock popped sharply on big volume but no news late on a Friday afternoon so we took the opportunity to lock down some gains. We have maintained a small position in this value play hoping that improved operating execution and the large cash balance will lead to another pop in the shares.
We continued to add to our VVTV position, averaging down as the stock remained under pressure digesting the secondary offering. It appears that the new shares have found a home as the stock has bounced off its post offering lows and volume is back to normal.
We have not had any success with our Russell 2000 (IWM) Put Spread but we still like this trade as in a correction it will provide high beta downside protection for the portfolio. We started this trade using March options and then rolled forward to April and May. In our latest move, we moved the strike prices up by $3 (now $83/76) so that we would have greater delta during a market correction. Over the past few days, small caps have started to lag, leading what so far is a modest pullback in market.
We added to our initial position in CenturyLink (CTL). CTL closed its merger with Qwest on April 1st. We expect CTL to up its synergy target either on the upcoming first quarter conference call or over the summer. While we wait, CTL has excellent downside protection by virtue of its very secure 7.2% current yield. We plan to build this position further as we think high yielding, defensive stocks are a good investment theme for at least the next few months.
Cablevision (CVC) has pulled back since mid-February. We added to our long standing core position. The latest dip seems to initiate from worries about the company making another acquisition outside its NYC footprint as a result of the announcement that Insight Communications is for sale. We don't expect Insight to be a CVC target. We also think 1Q11 subscriber trends will rebound from some one-time issues in the fourth quarter related to affiliate fee disputes. Earnings are due the morning of May 5th.
We trimmed positions in Liberty Capital (LCAPA) and Central European Media Enterprises (CETV). These were very small sales. In the case of LCAPA, we are just managing what is by far Entermedia's largest position. We have a percentage target position in mind and when the stock spikes up and the position gets too large, we trim back to our target. In the case of CETV, we think recent strength in the stock is premature and related solely to strength in the Euro. Euro strength is not due to improving economies in Central Europe. We think CETV is a couple of quarters away from a real turn in fundamentals. We hope to add back what we sold and buy more once we see a turn is at hand.
Finally, our weekly timing model has been neutral or bearish the past few weeks. We sold a long position in the S&P 500 (SPY) at a profit and then initiated a short. We covered the short today, also at a small profit. After missing the mid-January to mid-February rally, the model has posted three straight winning trades.
Position in VVTV, IWM, CTL, CVC, LCAPA, CETV
Tech Randoms
Sean Udall
Level 3 Comm (LVLT) -- Pure and simple, the merger is a watershed event for this name. It's going higher.
Negativity abounds with this too. Akamai (AKAM) down, Limelight Networks (LLNW) down, Internap Network Services (INAP) down, all optics co's down. Apple (AAPL) down, Netflix (NFLX) down -- ok, that's one I agree with. The Naz is down. Heck, XO is barely up. Did people forget that Terramark was nabbed by Verizon (VZ)? Or isn't AT&T (T) buying out someone? Oh yeah, T-Mobile for $39 Billion.
Say it with me... pricing power, capacity and cfontent delivery are merging with (or being driven by) my AAAOC theme. The AAAOC again stands for Affordable, Anywhere, Always On Computing.
Bottom line, why is LVLT doing this deal and more importantly, how is LVLT doing this deal with pre-funded debt already secured?
The fact that LVLT is actually able to do this deal should be a clarion call to what is occurring and underlies the themes driving this deal. And it isn't about cost reductions, or debt covenants.
No way this deal gets done in 2010. Or 2007 and likely not even 2005-2006.
Position in LVLT, AKAM, AAPL
For more from Sean, take a free trial to TechStrat
Tuesday, April 12, 2011
Gold Update: $1450 Retested
Lance Lewis
Don’t look now, but it looks like we just had our successful retest of the $1450 area in gold. The low for Friday’s option expiration is now likely in.
Position in gold, gold stocks
CAVM Follow Up
Jeffrey Cooper
I am ringing the cash register on the Cavium Networks (CAVM) scalp buzzed previously.
Option Action: Target, Harley Davidson, and Airlines See Bullish Activity
Steve Smith
With the S&P 500 Index selling off nearly 1.5% the VIX has popped 10% to 18.30 and the put/call ratio has moved to 1.10 which is well above the 0.72 10 day moving average.
Some notable option activity today includes:
Target (TGT) is seeing notable volume in the October $48 puts as several large blocks have traded at the offer between $2.95-$3.05 for a total of 10,000 contracts. Shares of TGT have been one of the worst performers among big box general merchandise retailers declining some 17% for the year. Open interest is sufficient to cover sentiment data suggest this was an opening purchase. This could have been tied to stock to create a married put to gain upside exposure with limited downside risk. The company offered an investor update today at an ISE Group Retail Summit saying it expects EPS of $8 and revenues of $100 bln by 2016/2017.
Airlines are enjoying a second day of a relief rally as oil continues to tumble. It looks like some options players believe the rally could continue. Airlines have seen an increase in both business and leisure travel and with decreased capacity improved loads and the profit picture. But the recent surge in crude oil had caused anxiety that soaring price of jet fuel would hurt margins. If Goldman’s call to exit long oil (and other commodity) positions proves correct lower fuel prices could turn sentiment positive for the airline industry.
It looks like some options players are betting the airlines stocks could rise through the summer travel months. Notable activity in Delta (DAL) as 82,000 call options have traded in the first hour of trading Tuesday. By way of comparison, only 2,685 puts have changed hands. Shares are up 63 cents to $10.06 on a day of relative strength in the airlines. In Delta’s options, two large spreads are responsible for a good chunk of the volume. One investor paid 41 cents for the June - September $11 call spread, 18,000 times and is possibly rolling from June to Sep -- extending a bullish view on the airline an additional three months. Another spread is a Sep $11/ $12 call spread, bought at 31 cents, 16500X, and might roll down a bullish position from the Sep 12s to the 11s. Delta shares have been trending southward since late-November and hit a new 52-week low of $8.93 Friday. Even after a two-day 11.1 percent rally, the stock is down nearly 18% since the unrest in Middle East began in early March and are down some 30% from the November 52-week high.
Harley Davidson (HOG) investors are showing interest in the April 40 and 41 calls on the motorcycle maker. April 40 calls, which are 1.4 percent out-of-the-money and have a few days of life remaining and are the most actives. 1605 traded (61 percent Ask) vs. 1,106 in open interest. April 40 calls are seeing similar action. 4,575 calls/811 puts traded in HOG so far. No news on the stock today. Next earnings are expected April 19 (before market). Annual shareholder meeting is 4/30.
Murphy Oil (MUR) oil shares are off 3% as the price of crude continues to fall. Prompting active put activity. Notable volume in the May $72.50 puts saw several large blocks trade within the first few minutes for a total of 5,000 contracts. The trades were done at the offer prices for an average $2.60 a contract and appear to be opening purchases.
For more from Steve, take a free trial to OptionSmith
Wednesday, April 13, 2011
Energy -- Dare to Disagree With Goldman
Yaron Sadan
Goldman came out with a note yesterday encouraging clients to dumb their oil holdings and lo and behold, oil is down 4% – correlation, not necessarily causation, I know, but still. Remember the good ol’ days when oil was at $10? Anyway, let’s put today’s move in context (this is the weekly chart through yesterday -- see the chart below).
Click to enlarge
Still quite a bit higher than the roughly $85 we saw at the beginning of the year, not to mention the beginning of 2009. Simultaneously, we have witnessed the energy sector pretty much single-handedly pull the equity markets up, with a 14+% return vs. the S&P 500’s 6% total return.
I actually don’t have much exposure to oil per se, but I’m definitely overweight energy. So why am I NOT selling my Market Vectors Uranium+Nuclear Enrgy ETF (NLR) and Market Vectors Coal ETF (KOL) and First Trust ISE-Revere Natural Gas Idx (FCG) like I did iShares Silver Trust (SLV) the other day and rotating into utilities or healthcare? For one, when you get in at a good price, you can withstand a lot of market volatility. Secondly, the fundamental reasons why I took a position in energy (political instability, risk of rising protectionism, risk of inflation, increased capital investments, solid balance sheet fundamentals, yield, etc.) are all still in place. It’s that simple.
Some might say that a global slowdown will pressure oil, and they are absolutely right. However, I anticipated a slowdown already BEFORE I took a position and it STILL made financial sense. So either, the expected slowdown will come and I’ll generate solid yields with upside optionality in case of inflationary pressures, or a slowdown will not come and I’ll generate solid returns based on analysts mispricing the top line growth potential. In the meantime, I maintain a hedge against an increase in political turmoil, protectionism (that’s why I concentrated on locally available energy) and inflation. So while Goldman can make predictions about where oil is heading in the next day, week, month or year, I prefer to invest with a longer horizon and by looking at the total investment potential and risk as compared to other alternatives.
Relevant ETFs: XLE, USO, OIL, BNO, NLR, KOL, FCG
Position in NLR, KOL, FCG
Thursday, April 14, 2011
WAB Could Explode to the Upside
Jeffrey Cooper
Westinghouse Air Brake Technologies Corporation (WAB) shows a first pullback following an upside explosion and an N/R 7 day yesterday suggesting a turn up.
See daily WAB below.
Click to enlarge
Position in WAB
First BMRN, Now DNDN
Fil Zucchi
Not sure if the fast money is cycling through "obvious" buy-out targets in the bio-tech space, but yesterday we saw funky action in Biomarin (BMRN) (interesting that it has not given anything back today), and this morning it is Dendreon's (DNDN) turn, with the May 42 and 43 calls very active on a 10% spike in volatility.
As the saying goes... from the options market to the buyers' ears, ehrr, wallets.
Positions in BMRN, DNDN
Too Much of A Good Thing
Peter Atwater
To Michael Davis' comment on ZIRP, I'd offer that ZIRP WAS a great thing for the banks, but at this point ZIRP IS NOT a good thing at all.
To explain...
By aggressively taking short term interest rates to zero, the Federal Reserve created the ultimate carry trade for the banking industry in which they could borrow short and lend long. And for some period of time this worked like a dream.
The problem for the banking industry, though, is that over time bank assets begin to re-price to reflect lower interest rate levels so that the the artificially wide net interest margin begins to get squeezed. And with interest rates stuck with a floor of zero, banks can't drop deposits any lower in response as loans reprice lower.
The net result is that the longer we stay in this ZIRP environment, the greater the pain ZIRP inflicts on the banks.
Oddly enough, and confirmed by JPM's CFO on CNBC yesterday, the best thing that could happen for the banks is that the Fed increases short term interest rates. In response, the banking industry would probably do nothing on the deposit front to raise interest rates, but they would quickly reprice loan assets higher.
But there is another dimension to ZIRP too, and that is that it benefited the big banks, who rely heavily on wholesale funding sources, far more than it helped the small and midsize banks who compete tooth and nail for local deposits. For the small banks the benefit of ZIRP was very short lived and over the past 6-12 months it has acted like a pillow placed over their mouths.
As I have said over and over, it is not the depth of a recession that matters, but its length. And no where is that becoming clearer than in bank interest margins.
Position in JPM
Mailbag: PAAS Getting a Beating
Terry Woo & Matt Theal
Matt and Terry,
What's the news on Pan American Silver (PAAS)? It's dropping fast while silver is making new highs.
-Minyan J.
J,
There was news yesterday of Bolivia's government planning to expropriate mines. This would affect PAAS as Bolivia accounts for 13% production. Our credible sources are saying this would never happen as the Bolivian government doesn't have the expertise to run the mines and the government knows everyone would leave.
Besides, the news was yesterday and PAAS was up all morning. So we believe the weakness today has more likely to do with expiration games (tomorrow). We're looking to get aggressive and may leg into this weakness once the stock stabilizes.
-Matt and Terry
Editors Note: This was originally sent to Active Investor subscribers, click here for a free trial.
Position in PAAS
Google Earnings Analysis
Sean Udall
Google (GOOG) is being shot down pretty hard for what looks like an inline to beat release. Revenues look very strong beating last year on Ex-Tac basis by over 29%. This number alone has me surprised by the post report weakness.
However, the EPS line is shy by about a nickel, though this EPS number would have beaten estimates just a few weeks ago. So the machines seem to be shooting an ever so slight EPS miss (though I believe still 20% plus growth) while ignoring what looks to be one of the better Revenue numbers that I've seen in some time. In fact, this is revenue acceleration which is nearly unheard of from a company this size. I'll need to look to see when the last time GOOG reported nearly 30% revenue growth as it's been a while.
Not to be forgotten is the continuation of prodigious cash flow which looks like 3.2B operating and 2.2B free. Alright, people may be picking apart close to a billion in capital expenditures. From this GOOG investors point of view, I like to see my growth companies spending money – that’s how products like Android, Chrome, YouTube and others kick in to produce accelerating revenue growth!
Anything close to down $40 and I'll be adding more.
Position in GOOG
Friday, April 15, 2011
Hi-Lo Silver, Away!
Todd Harrison
I typically don't like to get involved in parabolic frolics--well, that's not always true--but I've been watching the price action in silver, as discussed last week.
While I know all too well that markets can remain irrational longer than most folks can stay solvent, I've dipped my wick on the short side of silver.
Stamp a ticket at $42.60ish, which may be the other side of when I was trading around the long side in single-digits, way back when (as old school Minyans might remember).
Doesn't make it right; just sharing the process.
R.P.
Position in silver
Trading Over the Earnings Season
Smita Sadana
Our desires always disappoint us; for though we meet with something that gives us satisfaction, yet it never thoroughly answers our expectation.
-Elbert Hubbard
When the March decline seemed to be coming to an end, I shared my worries about possibility of under-performance in tech-stocks during a market bounce. (For more, please read notes on 3/22 and 3/30) Google (GOOG) is the first casualty of that worry.
Technology is usually a widely followed sector, ever since our love affair with tech companies began in the mid 90’s. For many people that was the first introduction to the stock market and this love was followed by betrayal of the 2000-2002 bear market. I still find people who fondly remember ticker signals of tech companies that no longer exist or trade companies that have seen their days of glory. With two of the strongest emotions at the helm, it’s often easy to project this tech-malaise over to the broader market. However, I feel that the easiest way is to look at OR sidestep tech companies directly.
There are two ways to play the tech earnings season. Pre-earnings run up, which is a popular bull market phenomenon, seems to working in select stocks.
But I wouldn’t be too aggressive over the actual release as I personally find it easier to manage lost-opportunity dollars than losses in real-dollars! It’s best to escape an unexpected 5% decline. Since the earnings season has just begun and given the continuing underperformance by techs, especially semis, I fear that there could be other misses in tech sector in the next two weeks.
CDE and PAAS Update
Terry Woo & Matt Theal
Following up on yesterday's news, Coeur d'Alene Mines (CDE) says it has received assurances that its San Bartolome mine is not subject to any nationalization.
CDE is up 5.5% on the news.
This is good news for our Pan American Silver (PAAS) position that we added to yesterday, but the company is still awaiting word from the government.
Position in PAAS
Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
