IF YOU HAD A BRILLIANT FIRST QUARTER SHUT UP ABOUT IT ALREADY
The first quarter of 2012 was like a Grateful Dead concert if you are into dropping acid and experimenting with mushrooms. There were plenty of opportunities available to get what you wanted. The results were immediate. And everybody walked away with great experiences to talk about for years to come. Here is how it went for my individual stock picking during the first quarter: -- PRGS position initiated on 1/17 (position liquidated on 3/28) +26% -- PTGI initiated on 1/17 - 1/18 (still holding) +28% -- GSIG initiated on 1/17-1/18 (still holding) +10% -- SPRT position initiated on 1/29 (position liquidated on 3/29) +20% -- DPTRQ position initiated on 3/22 (still holding) +34% -- CIS initiated on 3/26 (still holding) +15% -- SYNC initiated on 3/29 (still holding) +6% I'd love to talk about how my in-depth analysis led to these opportunities that leave me in rarefied air that cannot be matched by mere mortals that I laugh at while petting a striped cat from my castle in the sky. But that would be bullshit. That would be giving myself more credit than I deserve. That would be playing the game that so many others with a keyboard and an ego like to play. This was the best first quarter in 14 years for the US equity markets. That means that the environment was extremely accommodating and forgiving to anyone who decided not to get in his or her own way. The more aggressive your strategy, the more favorable your returns. That is as long as, again, you didn't get in your way. And that was my genius in the first quarter. It wasn't my stock picking. Not even close. It was the fact that I came into this year bearish after being bullish since the bottom on October 4th when I loaded the boat with leveraged ETFs. Right before Christmas, I believe it was, I began buying inverse leveraged ETFs planning for the market to tank into January and beyond. I had sentiment data that was corroborating with technical data and further confirmed by fundamental data telling me the market was on its way down. And now here is the real genius of my first quarter. Are you ready? This is going to blow you away. My genius and my secret to success in the first quarter was that I changed my mind. Yes, that was it. On January 10th, I took the losses on my inverse leveraged ETFs and I didn't look back. The market was telling me that I was wrong and I didn't argue with it. I could have stuck to my guns, dug my heals...
HERE IS THE BREAKDOWN ON WHY I PURCHASED SHARES OF SYNC TODAY
Took profits SYNC position on July 10th in the mid-14 range for a 100% plus profit. Bought shares of SYNC today in the low-7 range. A small starter position to begin. I will increase as the performance warrants. I mentioned SYNC briefly last week. I wouldn't call it an investment, as it doesn't possess the value/restructuring angle that I look for when I profile companies in "The Gun". I wouldn't call it a trade either, as I am willing to hold it for longer than a few weeks. I guess you can call it an "investitrade". It's a mix between an investment in a concept company that has some real potential and a trade in a company that is exhibiting a good deal of technical strength. Insiders were very active in buying the company after it IPO'd at the low end of its expected range recently. They were snapping up shares all the way up to $6 per share. They have been consistently growing revenues while achieving profitability in 2011. Their major source of revenue comes from advertising as a result of a partnership with Google and shared with the companies they count as their clientele. Major customers include Verizon, Toshiba and Charter. Given the fact that they are in the high profile and increasingly popular world of facilitating online video content they do make for an acquisition target for a company looking to expand their reach in this field over the coming years. Acquisition will come with growing their customer list, adding more sources of value for those customers and becoming an indispensable part of those companies online presence. As those initiatives take off, which I believe they will, so should the stock price. This comes from the S-1 filing for SYNC: Well-positioned in large and growing market . The market for Internet-delivered content has grown rapidly over the past several years. We have been delivering online solutions to customers since 2000 and, as of September 30, 2011, had over 45 customers, including some of the nation’s major high speed Internet service providers and one major consumer electronics manufacturer. We continue to make ongoing investments in our platform to expand its functionality. We believe we are one of the only companies that has a platform solution with the scale and functionality to allow the largest high-speed Internet service providers and consumer electronics manufacturers to develop or expand their online video or other online and content offerings. As a result, we believe that we are well-positioned to gain share as the market for these services continues to grow. Established customer base with predictable search and display advertising revenue . We have long-term...
AND EVEN MORE PORTFOLIO CHANGES………
As the first quarter winds down, I am feeling compelled to reevaluate the portfolio from a risk/reward basis. This has caused me to liquidate some of the profitable positions taken during the quarter, in favor of allocating those funds into other assets in the coming quarter. Here is what took place today. During the trading day I tweeted the following: SPRT has further upside, however, there are better opportunities for gains in the months ahead, which is why I sold out of the position today after holding it for two months with a 20% profit over that time. SYNC I have more details on here. As I mentioned some weeks ago, the fact that the first quarter has experienced some generous gains in the portfolio allows me the opportunity to really push the envelope for gains in Q2. I am setting myself up to do just that with these...
CURRENT PORTFOLIO POSITIONS
During the morning I tweeted the following: This marks the first time in 2012 I have liquidated an equity holding since accumulating individual positions starting in January. I did so more to make room for some other ideas I have rather than an overall bearish perception of the market. However, I will say this: If we do manage to close below Monday's low, marking a red cloud in the field of green I described over the weekend, I will put a hold on any new buys. I will raise more cash if the market weakens from there during the weeks that follow. In bull markets you wait for the market to tell you to act. If you attempt to guess every top according to each and every signal that crosses your path, you would have been out of this market in February. It's not the way to play the game...not in a bull market, at least. Here is the current portfolio after the recent addition and liquidation: Long SPRT http://www.zenpenny.com/?p=3451 Long PTGI http://www.zenpenny.com/?p=3412 Long GSIG http://www.zenpenny.com/?p=3412 Long DPTRQ http://www.zenpenny.com/?p=3759 Long CIS...
CONSTANTLY ATTEMPTING TO AVOID RISK IN THE FINANCIAL MARKETS IS A FOOL’S GAME
I draw on experience quite a bit since I have been at this since the mid-90s. The only time I have been away from it is from 2006-2009 after I closed the doors to my hedge fund and decided to take my professional life in a completely different direction. The entire time I have been trading I have been public about it. By public I mean that I have a need to share my thoughts and analysis with whomever will listen. When I was working on an institutional trading desk I would share ideas with those around me. When I stopped working for Wall Street firms I would talk shop with friends who were also involved with the market. I started a blog in 1998 before blog was a word. I simply began typing ideas and posting trades. As a result of these experiences and interactions with all types of investors I have drawn a distinct picture of what each period was like. In the 90's you couldn't get a single trader to even consider hedging. It wasn't a consideration in the least bit at that time. There wasn't a need for it due to the favorable circumstances. If you wanted to avoid risk you went to cash and that was that. In the early 2000's the bullish euphoria was ongoing despite the bursting of the internet bubble. My website was quite popular then and I had a small army of paying members. I remember when I went from being the ultimate cheerleader of the bull market to raging, shit kicking bear I had a mutiny on my hands. This was during the second half of 2000. I was balls to the wall long at the March 2000 top in the Nasdaq after being up nearly 400% in 1999. I wasn't about to take my foot off the pedal. I paid for it by one of the steepest and fastest drawdowns I have ever experienced between March and June. When I recovered the drawdown during the summer months and began really looking into the market, I decided that the party was indeed over. The punch drunk bulls of the time were not ready to hear that song and I lost a good deal of followers, members and "friends". At that time, being bearish was considered being stupid, late and backwards thinking. Starting in late 2002 the ramifications of what had happened and the dim prospects of recovering what was lost began to sink in. 90% losses in some of the popular names were not uncommon. The thought of technology coming back was the last thing on the minds of...
PESSIMISM IS AT ITS HIGHEST POINT FOR 2012 ACCORDING TO ONE SHORT-TERM INDICATOR
I haven't talked sentiment in awhile mainly due to the fact that it doesn't work during bull markets. I abandoned sentiment surveys, put/call ratios and the like in early January and haven't looked back since. However, these types of short-term surveys of sentiment have some use. The 2 day and 5 day moving averages of the combined put/call ratio hit its highest level of 2012 this week. The market should respond by continuing forward the remainder of this week. It may do it slowly...but it will do it. Remember, if you are a bull, a low volatility, stable advance is ideal. If you are a bear you want shit to hit the fan as much as possible. Not in terms of news events or macro shakeups, but in terms of volatility and sloppy behavior. There has been very little in terms of anything volatile or sloppy taking place in the market in 2012. As long as this landscape remains in place, the advance continues. It is as simple as that. Here is the chart of the put/call with eloquent notes and elegant lines: click chart to...
THE GUN: SHARES OF CIS ARE A LOW RISK/HIGH REWARD OPPORTUNITY BASED ON THIS ANALYSIS
Chinese stocks were decimated and banished from the vocabulary of all speculative investors in 2011. The mere mention of Chinese companies trading on US exchanges is still associated with reverse mergers, frauds and lack of transparency. Entire research firms were built around dismantling Chinese stocks. Hedge fund managers that fell for some of the better known names, such as Sino Forest, were decimated. The ravaging that took place in these stocks last year has led to a dead period in many of these names in 2012. By dead period I mean a period of sideways trading with very low volume and a general disinterest by nearly every class of investor. These dead periods are a prerequisite to the better established names - call them survivors if you wish - carving out trading bottoms that allow for the companies to experience substantial upside gains. There is a baby with the bath water mentality that takes place during these types of blanket panics. It is only natural that there will be value to be had in companies that potentially have exponential upside once sanity returns. One such company with the potential for substantial gains in the future is CIS. One of the largest IT companies in China, they provide services to everything from the financial services sector to energy and media. I purchased shares of the company today with plans of holding for the long-term. Reasons are as follows: Fundamental picture Key Points: - Price per share was $16 exactly one year ago. Currently trading at an 80% discount at a little over $3 per share. - Share decline was exacerbated by numerous factors that were reinforced by the panic surrounding Chinese stocks in the second half of 2011. - One such factor was the forced liquidation of shares held by management that were pledged as collateral for margin loans. These forced liquidation represented nearly 10% of total outstanding shares. - Another factor was the departure of the CFO from the company during the second half of 2011. - Another factor was that the CIS used the same auditor as another embattled Chinese stock VIT. Vanceinfo's (VIT) auditor was issued a subpoena by the SEC during Q3 2011. - Following these events the company restructured their management team during Q4 2011. - The company is currently trading at less than 2 times NET CASH and less than 1 times NET LIQUIDATION VALUE. - The company balance sheet is as clean as a whistle. Debt free. - Top and bottom line took a hit during the second half of 2011 due to the turmoil within the company, as well as turbulence within...
THE 5 CHARTS THAT HOLD INFLUENCE OVER THE MARKET DURING THE WEEK AHEAD
click chart to enlarge
HERE IS A VERY SIMPLE WAY TO JUDGE IF THE MARKET IS PREPARING TO TURN INTO A MONSTER OVER THE COMING WEEKS
There are many complicated and drawn out methods of market analysis that attempt to extract profits from either individual stocks or entire indices. A majority of these complicated methods of analysis are nothing more than tools that allow the originators of such work to internally justify an overpriced education and an abundance of hair gel. Perceived genius, while allowing you to have an abundance of swagger around your wife and kids, doesn't play well outside of your own home and often leads to painful lessons in humility shortly thereafter. With that said, I enjoy keeping things as simple as possible so that I can avoid having an inflated ego inside of my home and being constantly humbled "the old country way" outside of my home. It also tends to work better within the structure of the markets. The most simple methods of analysis are often the most profitable. During the coming week there will be a very simple means of judging whether the market is in the mood to unleash Easter bulls or Easter bears as we enter April. In the chart below, I have outlined a phenomenon that I like to describe as fields of green and red clouds. Whenever these fields of green are interrupted by red clouds then it is a sign to be vigilant of a change in character for the market. The chart below has all the details: click chart to...
CURRENT PORTFOLIO POSITIONS
I made a small addition to the portfolio this week. It constitutes less than 2% of the portfolio since there is a chance that I can wake up one day and the bid could be 80% below where it closed the previous day. The position is DPTRQ, a company currently in bankruptcy. The explanation behind the buy can be found below. Otherwise, everything remains the same. The current portfolio has been working so well this year that I would be crazy to consider changing anything drastically until the market tells me to. Long PRGS http://www.zenpenny.com/?p=3394 Long SPRT http://www.zenpenny.com/?p=3451 Long PTGI http://www.zenpenny.com/?p=3412 Long GSIG http://www.zenpenny.com/?p=3412 Long DPTRQ...