InvestorGeeks

Watch List Notes for 26JUN07

by Jason

I’m writing this one directly into the blog, and with any hope it will go up before market open today. Let’s what we have on dee plate.

AMGN
Notes from late last week: “Stoch sell. MACD still strong. I think this guy is recharging.”

I’ve since changed my theory from “recharging” to “dropping”. It’s looking bleak for this guy short term. 30DMA is providing resistance and Stoch and MACD are signaling sell. Lots and lots of support at $52. And although it’s well below my MOS of $65, I sold my 60 share stake last Friday at $55.62. There’s a lesson there on trusting your instincts while selling, as I could have sold it at $60 and kept $22 more, but that’s another story.

I have a bit of sellers remorse though. This really was a value play. I sold it in my trading acount, which means full tax on the $5 I made, not to mention E*Trade’s high fees. And I’m reminded of a bad sell I made on YHOO last summer where I avoided a $1 loss that was coming, but then missed the $6 run up. That could be happening here.

In any case, I thought it would be good to have some cash on hand going into this little bear run so I dropped this one too. Though my gut tells me I should possibly be selling this next stock to lock in some real profit.

GRMN (I own 75 shares)
Notes from late last week: “Can anything stop these guys? My higher sticker price was around $75, so I’m looking for any reason to sell. I want to let it run, but I’ve “made my year” on this one stock already. I’d like to ensure that I don’t give it all back. Need to figure out a good stop placement: $69.90?”

I’m glad I didn’t set that stop because I would have been stopped out and the stock has gone up since. But I haven’t made nothing until I sell right? But then what am I going to do after I sell? Put it back into GRMN? I need a better alternative, and I’m just going to watch this carefully for a more pessimistic sign. The thing is flying high right now.

AMD
Looking strong here. MACD and Stoch have thrown buys. The price is above the 30DMA, but I’d like to see a full bar there. I have some cash on hand, maybe this is where it should go. Seems like the news about AMD outsourcing fabrication went over well. Was it enough to turn the stock around? I’d be looking for the stock to reclaim the 200DMA at around $17.50, but there’s a lot of resistance on the way up. Plenty of support at $13.

ERTS
I second guessed myself, when ERTS went above my selling price of $49 last week. But it seems that was on the back of a stronger market, and the price is south again. This is a troubled stock (at least short term) that I don’t need the headache for. The 30DMA seems to be giving a lot of resistance. This one is going on the back burner until I gain my confidence back in EA. Technically, I’d like to see a full bar above the 30DMA and the 10DMA cross above the 50DMA before jumping back in.

EBAY
30DMA is showing resistance, but this stock is also in a nice little up channel. A break of the 30DMA could be very bullish. Look for more resistance at $34, support at $31.40. I think could see a large run here like we had with Amazon earlier. eBay is another tech business that Wall Street (and Main Street) doesn’t understand. Why did they buy Skype? Why did they buy this or that? What are they doing? Is the toning down of Google advertising going to hurt them or a good sign of their strength? I might buy some of this now and hope they can break $35 this time. Going to do some MOS calculations to check my risk here. Read here for Phil Town’s eBay analysis from last year (when the stock was at about the same price). My numbers are a bit more conservative, but they are still saying buy buy buy.

Current Earnings: $1.05
EPS Growth: 22%
Average PE: 44
EPS in 10 Years: $7.67
Future Value: $337.47
Sticker Price: $84.37
MOS 50%: $42.18

I’m going to be looking to buy this fella today. I’ll let y’all know how it goes.

QQQQ (I own 90 shares)
Staying the course. One of the major indexes above its 30DMA. I think we see a bounce here or after one more bad day. Holding this to keep pace with market.

ACN
My notes from late last week: “3 Buys. Looking good. $40.45 entry o short-term pullback. Need to do a MOS calculation.” And the stock is doing great. Still need to do that MOS, so here it is:

Current Earnings: $1.61
EPS Growth: 17%
Average PE: 20
EPS in 10 Years: $7.74
Future Value: $154.78
Sticker Price: $38.69
MOS 50%: $19.35

ACN is a great company and great stock, but it’s trading at around or just a little above sticker price (according to my off-the-cuff here). So I can’t invest now. My Average PE is a little low, so I might look into it more to double check. A PE of 34 (twice my EPS growth estimate, but higher than the historical average) gives us a sticker price of $65.78… which would be more room to grow.

AI and Trading

by Christian

I was reading a blog entry on CPPTrader that was referencing an article from Bloomberg. I am a newbie with respect to trading, but with respect to AI I have been a few times around the block. It was something that I studied in University and have had an attraction to for a long time. I guess I am lazy and would love to write a program that “thinks” for me. As a sidenote I am using AI in my algorithmic trading software, but in a different context.

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Avoiding Getting Burnt

by Christian

Colin brought up the following point:

Christian, it is extremely interesting to read your thoughts on neural nets. I’ve been looking at Neural Nets in a piece of software called Merchant of Venice - http://mov.sourceforge.net/ . Beyond that, what’s interesting is that as humans, we can look at current day situations and have an innate sense that history is repeating itself, yet there are these outlying situations that break those rules - like Amazon’s recent performance.

How to put that “sense” into code and avoid getting burned by the outliers is the real rub

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Stochastics and Multiple Realities

by Christian

Tom gave a reply that I think deserves more attention. Tom made the following comment to one of my blog entries.

One more thing, if the market is random per the stochastic process and you can’t find patterns in a market where patterns don’t exist, then why do we have trends? A trend is a pattern in my opinion.

If you look at the definition of stochastic process at wikipedia it does not say random as in completely random walk. What the definition is saying is that at each and every point multiple realities can occur.

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Is the Model Important?

by Christian

Tom wrote the following comment:

Christian, great article! I was building an ATS myself but had to put it on the back burner. Do you dabble in neural nets and AI modeling as well? I predominately use YALE, an open source data mining, machine learning software to build currency, futures, and stock models.

This helps me identify emerging market trends and trade (discretionary) accordingly.

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My Thoughts on the KKR and FDC Deal

by Christian

Yet another mega-private-equity take-over. This time its KKR buying FDC for nearly 30 billion dollars. I look at this deal and wonder how it is going to work. Business Week thinks this is a great deal.

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Ever Wonder Why the 2.0% Inflation Target is Important?

by Christian

You will often read in the news comments like the following.

Carl Tannenbaum said, “I think chances are evenly split between a cut and a hike right now it looks like inflation is coming down - but core inflation is still stubbornly above the Fed’s 2% target.

Why 2%, why not 3%, why not 1.12345%? After all 2% is some number somebody thought would be a good number. Well, the 2% number is based on a central bank strategy.

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My Head Says One Thing, But My Gut Says Another Thing!

by Christian

One of the things that I do to rationalize positions is take the opposite side and create my own debate. I often do this when my head says one thing, but my gut feeling is saying something else. So for this blog entry I am going to spill my guts and hope somebody wants to add their own two cents.

Ok, here is my problem that my gut keeps telling me, and its from from a comment Greenspan made.

Alan Greenspan said the housing downturn is more of a problem than credit quality and said the lending worries would be fixed if house prices rose 10 per cent.

Greenspan has been saying quite a few things lately with some things being that we may have a recession in the fall. I was reading in Business Week Greenspan is behaving the way he is because Bernake can’t tell the truth.

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What are the Managers of Ford Thinking?

by Christian

Ford is dire straits and we knew that. So what do they do? Sell Aston Martin! Idiots!!!! I am being harsh because I have not seen that much lunacy in a while. Aston Martin is profitable for Ford, and they sell what is profitable. What does Ford keep? Whatever is loosing money.

The Premier Auto Group, bogged down primarily by Jaguar, handed in a pretax loss of $344 million. Mulally, Ford’s top executive since September, has said Jaguar is not currently for sale.

Annual production dipped as low as just 46 cars in 1992. But the brand [Aston Martin] has enjoyed a resurgence this decade — a record 7,000 Aston Martins were sold worldwide last year and a similar number are expected to be purchased in 2007.

Oh yes let’s keep the stuff that is bleeding Ford and sell what is profitable for Ford! Yes that is smart, NOT!

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Take Notice: Chrysler and Magna

by Christian

For those that follow the car industry the linked news is definitely interesting. When I was studying to become a mechanical engineer I spent many a workterm working at Magna. My father was a higher-level manager at Magna and I used to have quite a few friends at Magna. For those that don’t know about Magna, think of it as the Microsoft of the car industry.

Magna was started by Frank Stronach an Austrian tool and die maker in the early 70’s. Frank found a niche in supplying car parts for the car industry. Supplying parts these days is a very lucrative business. What made Magna different from the rest is that they built an innovative company that appreciated its workers through things like profit-sharing.

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