Empfohlener Beitrag

TSLA a Value Buy? 2019 P/S below 1.5

Montag, 3. Dezember 2018

Shorting Euro Bund Futures on Recovering Oil Prices

I decided to go short on the Euro Bund Future. In my opinion this has basically been overvalued for years (imo mainly because of ECB buying government bonds, which will probably stop 2019; I might write more about my take on Bund Futures valuation when I have more time), I do not see much room to the upside; recently spiked up because of trade tensions and high volatility in stocks. Might go down a few points on China trade deal.

But the main idea why I think it should go down is oil price rising on calming trade tensions: I think a falling oil price is the biggest risk here, because it will make inflation go down and might cause ECB to extend bond purchase programs.

The Bund Future does not move a lot, so I decided to go for a leveraged ETF. I chose this as trading vehicle (I also thought about shorting the 15x long equivalent, but my broker could not find those to borrow anyway, so I bought the 15x short ETN; also has the advantage that total loss is limited to 100%) ISIN: DE000ETN0AF5. It trades at German exchanges.

Disclosure
I am long ISIN: DE000ETN0AF5. Bought at 0.083.

Disclaimer
Of course, everything I write is only my opinion and should not replace your own research. (It's not even a recommendation, it's only a documentation of and an explanation for my own trading.) I do not know the future either.

Mittwoch, 21. November 2018

Shorting Wayfair on Uptick, Overly Positive Articles

I have been waiting for some days to get what I regard as an attractive opportunity to make a few $ on one of the more obvious shorts in this market.

Last night i read this article on Seeking Alpha about an "Enormous Opportunity" the author sees in Wayfair (he means when buying the stock!), which showed me that it's still not too obvious to short it. Especially after it has rallied nearly 10% now in 2 days.

I just pick one sentence from the article here: "Companies like Wayfair are difficult to value without any realistic path to profits." - and while the author goes on to compare its P/S to Amazon's I firmly disagree with the sentence above: It is pretty easy to value a company with no realistic path to profits, with a negative book value and rising debt levels in a market that has stopped to be extremely bullish on anything that at least slightly reminds people on Amazon (or another "FANG" company). Obviously, a company without a viable business plan or meaningful assets will not survive a recession combined with a bear market. I'm not saying they can't be profitable at some point in the future - but, as Amazon is also increasingly selling furniture, the probability is low enough in my opinion to justify a bet that this stock will rather drop further than go up (except market or, more precisely, the group of FANG-related stocks as a whole "recovers" back to bubbly levels faster than I anticipate).

So I shorted some at $89.


Disclosure
I am short W stock.

Disclaimer
Of course, everything I write is only my opinion and should not replace your own research. (It's not even a recommendation, it's only a documentation of and an explanation for my own trading.) I do not know the future either.

Donnerstag, 8. November 2018

NFLX 2019: More Competition, Still Negative Cash Flow

Netflix is a great company, no question about that. But it is still spending much more than it earns (talking about cash flow) and I think it is not given that there will be any point in the future where they can significantly reduce spending on new content without losing a significant amount of subscribers. Sure, it's by far the number 1 brand in streaming series and movies at the moment, but what they are doing is not that unique and, more importantly, they do not own any significant technology that others could not use, too. They are simply spending massive amounts of money to create great content that is immediately available on their platform (and, in most cases, nowhere else).

What is underappreciated by most investors at the moment is, in my view, that the big media companies like Disney, Sony, TimeWarner have also been producing great content - and they have been doing that for decades, so their libraries are vastly bigger than what Netflix has (if you substract the content they licensed from Disney and the likes). Netflix' advantage at the moment is that they have the really fresh stuff. But, again, they can't have that without significant cash burn: at their latest quarterly conference call they said that in 2019 they will again have billions of negative free cash flow (but they expect "material improvement in 2020".

This is what made me raise an eyebrow, because I think 2019 will be far easier for Netflix than 2020 and beyond, because Disney will take (all their?) content from Netflix and start it's own streaming service, expected to launch in 2019 already and to contain everything from Mickey Mouse to Star Wars and Marvel. And you should not forget they are acquiring Fox, which has a huge library, too. I think Netflix management overestimates the growth potential beyond 2019, I'm not sure they will see any subscriber growth at all in 2020. Apart from Disney, Youtube, Amazon and HBO (which they also mentioned in their call) it's generally hard to estimate trends in media consumption 2 years ahead. I remember only a few years ago, hardly anybody was willing anything for streaming content: before Neflix and Spotify arised, illegal downloads and streams of music and movies were dominating the scene. This market is changing rapidly.

I have been thinking of buying DIS shares, because I think their streaming project is likely to become a big success - at least if they really put everything they own into it. But I am hesitating, because competition from the likes of Amazon and Alphabet (Youtube) - who can easily spend vastly more money on new content than even Netflix if they decide to go all in - seems to be heating up. At the moment I think it's harder to predict a winner than to predict that Netflix' lead will be far less unchallenged than its current valuation (even after a drop from all time highs earlier this year) of about 10x yearly revenue and 100x "profit" (quotation marks because cash flow is still negative: only the value of their library is growing, but I think we have to expect an inflation of new content, so I'm not really sure how to value all that), enterprise value (= market cap + debt - cash) near $150b suggests.

I shorted some NFLX shares when Nasdaq and especially "FANG" rallied on November 7, after midterm elections.

Disclosure

I am short NFLX common shares.

(Update: I had a tight stop - as I usually have with Short positions - and was stopped out already on November 8. I still would not buy the stock anywhere near these levels but it might have another run, if "FANG" bounces back further. I would consider shorting NFLX again and also shorting AMZN in that case.)

Disclaimer

Of course, everything I write is only my opinion and should not replace your own research. (It's not even a recommendation, it's only a documentation of and an explanation for my own trading.) I do not know the future either.

Mittwoch, 7. November 2018

Strategy: My Conditions for Short Selling

You always have to be very careful before selling a stock short. Remember: The amount you might lose is theoretically unlimited (to actually limit losses, first rule is to always have a stop order as an insurance!). Still, especially in a market environment where all stocks trade at high valuations, obviously it often makes sense to sell some stocks short.

For me, after having been burnt more than once, a candidate stock to sell short has to meet the following criteria:

1. Large caps

Even if you are totally right and the stock eventually goes to zero, you can lose a lot if you are trading small cap stocks that potentially gap up 50% or more one a day and you are stopped out (worst case: by a margin call) at a far higher price than you imagined. I do not short companies with market caps of at least a few billion dollars and I would prefer at least $50b.

2. High debt (or fast cash burning)

Companies without significant debt often remain overvalued for a long period of time, because (even though that is not true, of course) people tend to think if there is no debt, the company can impossibly go bankrupt and so it will "grow into it's valuation" at some point in the future.

3. Low growth

I don't short companies with high growth (expected). Those can, like small caps, go up very fast and make you lose your bet even if your correct in the long run.
I'm looking for companies that used to grow fast but have stopped to (and the company or environment have changed in a way that made me assume there is no way back to fast growth).

4. No extremely low multiples

I look at P/S and EV/Sales, P/E, P/B and compare them to the stock's history and competitors' valuations. For the same reasons as 1. and 3., I avoid stock with extreme valuations (like P/S or P/B below 0.5, P/E far below 10): Even if they are wrong, "bottom fishers" may come in and push the stock significantly higher for a period that is longer than you can afford.


Disclaimer
Of course, everything I write is only my opinion and should not replace your own research. (It's not even a recommendation, it's only a documentation of and an explanation for my own trading.) I do not know the future either.

Mittwoch, 31. Oktober 2018

Selling out of BYD (to buy more XON)

BYD announced q3 results a few days ago. They were roughly in line with what I expected, as was the optimistic q4 outlook. So, I am not selling BYD because profit is down, I think this is temporary, based on new models, new battery technology and new government incentives policy.
I would not buy large amounts of BYD at this point because of the long term outlook. It might be a few quarters too early to sell, because I think 2019 will be a fantastic year for their EVs business. But I expect that will be the peak: starting 2020, Tesla is going to produce in significant volumes in China (they recently announced they are going to speed up factory building there); other large auto companies from the USA and Europe are going to get out their electric vehicles as well, some particularly designed for the Chinese market.

Swapping BYD for more XON

I basically think BYD is a hold, but I am selling today, because I need more money to invest in what I think is the best opportunity at the moment (Intrexon: it's not a short term story and it did not change at all - share price still down with the market, 25% from where it was a few weeks ago; any news might move it 25% in an instant, like the - IMO totally insignificant - cannabis news did in september) - and I still think it would not be wise to buy anything on margin, as markets are only a few percentage points below their all time highs yet.

By the way, I also sold JD and bought more China agri-industries (which was a minor move, as I only had a small position and sold it for essentially no other reason but to concentrate my "China bet"-money at what I came to think is the best bet in Chinese stocks), and for similar reasons I also sold Red Hat although I don't have much doubt about IBM deal and so I think it is going to 190 within a year.

Disclosure

So my current portfolio is dominated by XON, TSLA and China agri-industries (live quotes for HK Stock exchange can be found here).

Disclaimer

Of course, everything I write is only my opinion and should not replace your own research. (It's not even a recommendation, it's only a documentation of and an explanation for my own trading.) I do not know the future either.

Montag, 29. Oktober 2018

Buying Red Hat below 180: IBM to pay 190 per share

IBM announced to buy all outstanding shares of RHT at $190 per share. So stock price will go to very near 190 (unless something unexpected happens that would stop the deal - unlikely IMO).

I bought RHT at 176 in premarket trading.

(Update: I closed this position with a small loss, shifted the money into XON; I have very little doubt the deal is going to happen but it takes a while until RHT shareholders and regulalators approve; I hope XON will move up faster but I would definitely not short RHT at this point.)

Disclosure

I am long RHT.

Disclaimer

Of course, everything I write is only my opinion and should not replace your own research. (It's not even a recommendation, it's only a documentation of and an explanation for my own trading.) I do not know the future either.

Donnerstag, 25. Oktober 2018

Great Earnings, Great Outlook - Adding to TSLA position

Today's premarket reflects what happened to other stocks reporting great earnings recently (like NFLX): after an initial large pop, the stock gives back some of the gains and trades only slightly above yesterday's highs (BEFORE numbers were out). But this is a very different situation.

Pre market traders probably do not see the game changing quality of this earnings announcement. The short thesis for TSLA stock is basically "the company is structurally bankrupt, because it is losing money on every car they sell". Last quarter, Tesla proved the opposite: they made money on every model they sell. And, above that, they predicted they will do so in every future quarter.

Basically, I still believe everything I wrote here about why market fails to value TSLA correctly. But, after q3 revenue came in 10% higher than I expected, I think all my estimates for 2018 and 2019 were too conservative - so I conclude TSLA at 315 is as cheap as TSLA was at 280 some weeks ago.

I doubled my TSLA position on pre market weakness (vs. yesterday's after hours) at 315. (Strategy: keeping core position long term, trading the other half on short term mispricing like this.)

Disclosure
I am long TSLA.
Disclaimer
Of course, everything I write is only my opinion and should not replace your own research. (It's not even a recommendation, it's only a documentation of and an explanation for my own trading.) I do not know the future either.

Update: Selling order was filled for a 2% intraday gain, still holding core position