Insomniac Hedge Fund Guy

| Felix Salmon

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Morgan Stanley’s $2.4 billion Facebook short By Felix Salmon MAY 21, 2012 Matt Levine had a very wonky post on Friday afternoon about the dynamics of the Facebook IPO in general and of the very misunderstood greenshoe option in particular. Now that we’ve all had a nice relaxing weekend, it’s maybe worth revisiting that greenshoe, because it’s actually possible, given Facebook’s tumbling share price today, that Morgan Stanley will make a substantial amount of money on it. First, it’s worth explaining how the greenshoe option is meant to work. In the IPO, the underwriting banks — there were lots of … Read more

Bond exodus on a par with eurozone bank run – FT.com

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Bond exodus on a par with eurozone bank run By Richard Milne A great deal of attention is being heaped on the possibility of a bank run across the eurozone. But something just as important is currently happening: a bond run. Foreign investors have left the government and corporate bond markets of Italy and Spain in droves in the past year and there is little evidence of the selling slowing down. If anything, the worry would be that the process carries on for some time as it has done in Greece, Ireland and Portugal.   Bill Gross A whale in … Read more

CME Group scores 3 on our checklist, but provides strong dividend yield and growth potential

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CHART- know how to read charts. I firmly believe I can improve the price of buying or selling from an understanding of chart action. Recent bullish divergence has been observed; +1   ANALYSTS- read analyst reports but come to your own conclusions. 4 strong buy, 4 buy, 9 hold (according to CNBC); +1   INSIDERS- if the people that know the company the best are not buying it, why should you? One director purchased 2000 shares on 4/27 at $274 as well as 400 on 3/14 at $275; +1   MANAGEMENT DISCUSSION 10Q AND 10K- this is the only truthful thing you will read … Read more

European Banks Unprepared for Greek Exit From Euro – Yahoo! Finance

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European Banks Unprepared for Greek Exit From EuroBy Elena Logutenkova, Liam Vaughan and Gavin Finch | Bloomberg – 1 hour 27 minutes ago Europe’s banks, sitting on $1.19 trillion of debt to Spain, Portugal, Italy and Ireland, are facing a wave of losses if Greece abandons the euro. While lenders have increased capital buffers, written down Greek bonds and used central-bank loans to help refinance units in southern Europe, they remain vulnerable to the contagion that might follow a withdrawal, investors say. Even with more than two years of preparation, banks still are at risk of deposit flight and rising … Read more

NYX, NYSE Euronext scores a 3 on our checklist

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CHART- know how to read charts. I firmly believe I can improve the price of buying or selling from an understanding of chart action. First bullish divergence seen since October of 2011; +1   ANALYSTS- read analyst reports but come to your own conclusions. 2 Strong Buy, 5 Buy and 12 Hold (according to CNBC).  Analysts remain neutral; 0   INSIDERS- if the people that know the company the best are not buying it, why should you? Positive balance of insider buying including action as of April 30th at a price of $25.48; +1   MANAGEMENT DISCUSSION 10Q AND 10K- this is the … Read more

JPMorgan Risk Chief Had History of Trading Losses and Sanctions – Wall Street & Technology

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PMorgan Risk Chief Had History of Trading Losses and Sanctions Goldman’s previous Wall Street firm received a slap on the wrist from regulators. By Melanie Rodier@mrodier MAY 21, 2012 Share on email Background checks, anyone? Irvin Goldman, the JPMorgan Chase risk chief who oversaw the unit that suffered a $2 billion trading loss in credit derivatives, was fired by Cantor Fitzgerald in 2007 for hemorrhaging losses that prompted regulatory action, according to Bloomberg. Goldman had only been at his job at JPMorgan since February. Yet according to Bloomberg’s source, the company’s chief risk officer, John Hogan, (who himself only became … Read more

‘s pain

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Although NYSE lost the Facebook listing, the way Nasdaq bumbled it is surely to help the NYSE long term. According to Barron’s article April 21st,  “Even as it invests in its technology and post-trade-services businesses, the firm has streamlined expenses, eliminating $670 million in costs since 2008. As a result, free cash flow last year was $870 million, on $2.7 billion in revenue. NYSE Euronext has signaled that its strong balance sheet can support a bit more debt, enabling it to steadily return cash to shareholders both through share buybacks and a generous dividend—which at the stock’s recent level near $27 … Read more

How bad was last week?

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Dow took its losing streak to six days, and has now fallen in 12 of the past 13 days. The WSJ points out that the last time the Dow suffered as many losses over a 13-day stretch was in October 1974, at the nadir of that decade’s bear market. What should also concern investors and market commentators is that this selling has occurred amid the heaviest trading volumes of the year. The NYSE had its fourth straight day in which at least four billion shares were traded.

PharMerica revisited

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April 13th we wrote that PharMerica was right to turn down Omincare’s $15 per share offer.  Since that time PMC has continued to underperform the market declining twice as much as the market as a whole. Is this just further proof that relative out-performance on the upside or downside is something to pay attention to or is there something wrong with PMC?  We attempt to answer this by revisiting the Stock Checklist.    They basically dispense medicines at long term care facilities. PMC gets paid by the pill which in turn is impacted on the revenue side by the number of … Read more

Do you believe a good company will come back from a 20% price decline?

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I certainly do.  I’m talking about Hess Oil.  HES.  Let’s revisit the stock checklist.  Hess Oil scores a 8, the highest rating I’ve yet to see any stock achieve.  Not only do I believe it will come back but double within 3 years or less.  Also check out Barron’s Article May 21st. This is a checklist I use to quickly come to a conclusion on a stock.  I score a stock, each line getting a 1, 0, or -1.  A stock  that scored 1 on each line would be a perfect 10. Unlike Bo Derek was,  it may be impossible … Read more

Magic Jack Redux (CALL) fails the smell test

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Fortunately, we don’t own any more Magic Jack stock and actually made money on it. I’m sorry I just can’t handle the bizarre way management treats their shareholders.  I never buy reverse merger stocks but the story and product on this was so compelling.    I’m not going to make any allegations here because bloggers have been getting sued left and right but let me say, I have to redo my checklist.   There is a flaw in the process as there is no way to account for the possibility of fraud.  Granted this possibility exists in almost any transaction. … Read more

Top Hedge-Fund Managers at Ira Sohn Investment Conference – Barrons.com

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Where Top Investors Are Putting Their Money Now By ANDREW BARY | MORE ARTICLES BY AUTHOR Top hedge-fund managers brought their best ideas to last week’s Ira Sohn Investment Conference. Why they like J.C. Penney and Kohl’s. Mixed tastes on Apple. The Einhorn effect was on full display at the annual Sohn Investment Conference last Wednesday in New York when David Einhorn, the head of Greenlight Capital, made a bearish mention of Martin Marietta Materials (ticker: MLM) and shares of the construction-aggregates maker dropped more than 10% in minutes. via Top Hedge-Fund Managers at Ira Sohn Investment Conference – Barrons.com.

A Miserable Week Leaves Stocks Down 4% – Barrons.com

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SLUMPING OIL AND NATURAL-GAS PRICES this year have taken a bite out of nearly all energy shares, and exploration and production company Hess (HES) is no exception. Yet a good portion of the stock’s recent 32% drop, to $44.60 from its 2012 high around $67, is self-inflicted. On April 25, Hess reported first-quarter net of $509 million, or $1.50 a share, down from $619 million or $1.82—a bit less than expected. (Both periods’ results exclude extraordinary items.) Meanwhile, revenue at the mostly oil-producing company—its output is 70% liquids and 30% natural gas—fell 7%, to $9.75 billion. Still, this wasn’t what … Read more

The world is coming to an end but we can share it on Facebook?

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Reasons why Facebook marks some kind of weird market top. 1.Round the clock coverage on CNBC and Bloomberg about the Facebook IPO and how much money everyone is making. 2.The largest tech (maybe any IPO) in history. 3. People you know that you didn’t know ever bought a stock, asking if you could get them some Facebook stock. 4.Savy insiders selling enormous stakes.  Who cares if Goldman keeps half. At the valuation they’re getting the 50% remaining is all a free toss of the dice. 5. Billion dollar side deals for companies with no revenue to speak of. 6. The … Read more

MCD, McDonalds Scores a 2 on our checklist, but looks undervalued

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A recent pullback in the price of MCD presents a good opportunity to buy this dividend paying stock; paying about 3.08%. CHART- know how to read charts. We firmly believe I can improve the price of buying or selling from an understanding of chart action.   +1; MCD is below both 50 day and 200 day moving averages but the RSI line is beginning to diverge which might indicate a near term reversal ANALYSTS- read analyst reports but come to your own conclusions.  +1; 3 strong buy, 13 buy and 10 hold (according to CNBC) INSIDERS- if the people that know the company the … Read more

Most technicals look poor

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I find few stocks in our portfolio that look like they are headed higher in the immediate future.   Even though oil has had a sharp and steep decline, prices still look like they have room to drop.  The test will come soon though as many oil services and some oil stocks like Hess  are trading at 2008 nadir levels.  At some point soon, these stocks will rise on declining crude prices and signal some kind of trading bottom.  This is the only sector of the market that has had significant insider buying of late. Buying is picking up in … Read more

Value at risk: time for more rigour – FT.com

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Value at risk: time for more rigourThat whooshing noise in the background is the sound of received wisdom crashing to the ground. One of the consequences of last week’s admission by JPMorgan that it had lost $2bn on credit derivatives trading is that it may spell the end of the notion of “value at risk”. VaR is already being given the once-over by the Basel Committee on Banking Supervision because of its inherent limitations as a way of measuring risk. That project has now become more urgent. Currently, VaR is essentially anything a banker thinks it is. It is time … Read more

Zagg: Real Sales Numbers Do Not Match Reported Earnings Claims – Seeking Alpha

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Zagg: Real Sales Numbers Do Not Match Reported Earnings Claims – Seeking Alpha. It’s hard to find companies that look this enticing to short.  As an early adopter of both iPhone and Zagg products, I can say unequivocally I don’t’ need Zagg protective covers any longer. In fact they intefere with the user experience in my opinion.  The advent of Corning’s Gorilla glass has made them obsolete as far as I’m concerned.  It’s nearly impossible to short sell though but you can buy put options. I’d go as far out as you can, because its hard to predict how slow … Read more

Buy Fossil: Sell-Off Is Overdone, Long-Term Opportunity Remains Intact – Seeking Alpha

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  Buy Fossil: Sell-Off Is Overdone, Long-Term Opportunity Remains Intact May 11, 2012  | 4 comments  | Stock markets are often prone to irrationality. History has shown us that stock prices can often diverge from fundamentals in both directions. We believe that Fossil’s (FOSL) stock price has diverged from its fundamentals, setting up a long-term buying opportunity. via Buy Fossil: Sell-Off Is Overdone, Long-Term Opportunity Remains Intact – Seeking Alpha. This is the best thing I’ve read reviewing the collapse of FOSL stock. I tend to agree with the author.  I don’t think FOSL has lost its way at all.  I … Read more

JP Morgan: Derivatives Now A Great Way To Lose Two Billion

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With the bank down over 8% on the announcement of at least $2 billion in expected losses, JP Morgan’s Jamie Diamond has some explaining to do.  And simply saying that the incident “puts egg on their face” isn’t cutting it.  The massive trading loss stemmed in part from a failed hedging strategy and derivatives bets placed by a large trader better known as the “London Whale.”   Known for a high level of risk management, JPM’s lack  of diligence does not inspire confidence in an already shaky sector with a looming European crisis on its hands. According to Sterne Agee … Read more

For Muni Bonds, Less Assurance – WSJ.com

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For Muni Bonds, Less AssuranceArticleStock QuotesComments 1MORE IN BUSINESS The last remaining insurer of new municipal-bond issues is bracing for a fall that could bring its industry to a new low—and possibly increase borrowing costs for some small local governments.Moodys Investors Service warned in late March that it might cut bond-insurer Assured Guaranty Ltd.s AGO -1.59% credit rating to the single-A range from the current Aa3, which is three notches below the highest rating of triple-A.A downgrade, likely in the coming weeks, would probably crimp demand from local governments and other municipal issuers for Assured Guarantys coverage, analysts and local government … Read more

SFD, Smithfield Foods Inc scores 3 on our checklist

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Overall Score:3   Trading Chart +1                                               Smithfield is showing bullish RSI divergence but note the  correlation with lean hog futures which have fallen out of bed Analyst Opinion: 1 Barron’s made the bull case in an April 11th article, titled Can Smithfield Foods go Hog Wild? Strong Buy 5 Buy 4 Hold 6 Underperform 0 Strong Sell 0 Insider Buying: 1 There was significant insider buying in Sept 11.  Usually stocks are higher within six months.  SFD was … Read more

‘s Scandal A “No Issue” For Buffett

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In an interview earlier today with CNBC, Warren Buffet expressed very little concern over the super retailer’s recent issue with suspected bribery down in Mexico.  Although certainly a black eye for the management team, Buffett feels the situation is a representation of  bad choices made by a few rather than a deeper rooted issue of widespread poor practices.  Considering the retailer’s recent issues with workers unpaid overtime, legal issues with the treatment of women, and other socially based blemishes, I wouldn’t be so quick to dismiss this as a case of “a few bad apples.” (As of December 31, Berkshire’s … Read more

We are moving to a new server

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To our followers, we are busy posting on a new faster, more reliable server that will be live in less than 48 hours.  Until that time you will notice an absent of posts on the older server.  We’ll continue to tweet as there is a lot to tweet about with the market going back into risk on risk off mode.  Thanks for your patience and support.

Arthoscope scores 3 on our checklist but very undervalued.

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ARTC Arthoscope   This is a checklist I use to quickly come to a conclusion on a stock.  I score a stock, each line getting a 1, 0, or -1.  A stock that scored 1 on each line would be a perfect 10.  Buy it! Some of these items are quite subjective.  For example how would I score Cash Flow?  If a company’s cash flow is much lower than it’s reported earnings, that raises a flag and I would score it a -1.  If there are more insiders buying than selling, I would score it a 1.  If there are … Read more

Equity Fund Redemptions in April Are Largest in 17 Years – Bloomberg

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Here’s why April has been a challenging month for money managers.  I’ve felt like I’ve been swimming as hard as I can upstream all month just to stay even.     Equity Fund Redemptions in April Are Largest in 17 Years By Charles Stein – Apr 27, 2012 11:56 AM MT   Global investors this month pulled the most money from stock funds in any April in at least 17 years amid escalating concerns that Europe’s economy is faltering. Equity funds had net redemptions of $18.6 billion through April 25, according to data from EPFR Global, a research firm based … Read more

| Reuters

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Shell bullish on China shale gas One of my primary thesis is that American know how and technology for oil and gas drilling is way undervalued in the market.  The OIH is very cheap from fear of margin compressions due to the collapse in natural gas prices.  There is some truth to this in the short term but that ignore very bullish long term fundamentals. via Shell bullish on China shale gas | Reuters.