Jason has done a wonderful job with this blog and as the previous post indicates, he has stopped to pursue other interests. Rather than letting the blog languish, he agreed to sell it so that someone else can continue where he has decided to leave off.
While obviously the writing will change to some degree with someone else writing, the themes will stay basically the same. The main focus will be investing with a bit of personal finance and other ramblings thrown in from time to time.
I'd like to thank Jason for doing a wonderful job and wish him the best in his other side projects. I hope to continue writing to his level and expand it into something he'd be proud to read. I look forward to meeting all the people who frequent the posts here and look forward to continuing this project.
Friday, July 28, 2006
Monday, July 17, 2006
The end of the Alpha Guy
After 227 posts this post, #228, will be my final post. I haven't been posting as much as I originally wanted to due to a lack of time and being busy with other side projects. I think if I try to keep writing, the lack of posts will continue.
I figured if I'm going to end this blog, it might as well be during a time I hit another goal. This week I passed by the $50,000 mark and it feels pretty good.
I just wanted to say thanks for reading this little blog of mine, thanks for those who emailed me and posted comments, and the other personal finance blogs out there.
I will continue checking the Alpha Guy email from time to time.
I wish everyone the best of luck with their personal finances, but also to remember that we only live once and we can't take the money with us. Spend time with friends, family, and have some fun.
If all goes well you will hear from me on a bigger scale (whether you will realize it or not) because my goals are big and I'm ready to accomplish them...
-Jason the "Alpha Guy"
I figured if I'm going to end this blog, it might as well be during a time I hit another goal. This week I passed by the $50,000 mark and it feels pretty good.
I just wanted to say thanks for reading this little blog of mine, thanks for those who emailed me and posted comments, and the other personal finance blogs out there.
I will continue checking the Alpha Guy email from time to time.
I wish everyone the best of luck with their personal finances, but also to remember that we only live once and we can't take the money with us. Spend time with friends, family, and have some fun.
If all goes well you will hear from me on a bigger scale (whether you will realize it or not) because my goals are big and I'm ready to accomplish them...
-Jason the "Alpha Guy"
Tuesday, July 11, 2006
Rebalancing and Program Trading
This post has to do with rebalancing a portfolio and program trading (for big portfolios). Some investment firms have multiple portfolios/funds that are set up for certain goals. For instance, one fund might be a regular long/short fund where it takes long positions as well as short positions. Another fund might be levered, so it will basically have the same positions as the long/short fund but in greater percentages (through borrowing). If the long/short fund has a 1% position in Microsoft (MSFT), the levered portfolio might have a 2% position in MSFT- so it's a 2x fund. This ration can be any number, I'm just using 2 for simplicity.
But sometimes things get out of whack because of a variety of reasons. Let's say the stock doesn't trade that much so the 2x fund is unable to get enough shares, or more shares are sold out of the 1x fund. If money leaves the 1x fund, stocks will need to be sold and this will throw off the 2x fund as well. This is where rebalancing and program trading come into play. Ideally rebalancing might happen once per quarter, but it can happen more frequently. Rebalancing basically means how it is read- rebalance the portfolio. Using software you can figure out which stocks are out of line and you might need to bring these positions up or down (you can also do this on Excel, it just takes a little longer).
Once this is figured out, most trading software platforms can automatically generate the trades and then you just need to send them to a program for trading. We use program trading because generally when you rebalance a portfolio it's a small amount of shares (percentage wise), but possibly hundreds of trades. With program trading we basically send all the orders to a program and it gets all the trades done. We just have to sit back and wait....I wish! We have to monitor the positions and trades to make sure things go smoothly, but using programs definitely saves some time.
But sometimes things get out of whack because of a variety of reasons. Let's say the stock doesn't trade that much so the 2x fund is unable to get enough shares, or more shares are sold out of the 1x fund. If money leaves the 1x fund, stocks will need to be sold and this will throw off the 2x fund as well. This is where rebalancing and program trading come into play. Ideally rebalancing might happen once per quarter, but it can happen more frequently. Rebalancing basically means how it is read- rebalance the portfolio. Using software you can figure out which stocks are out of line and you might need to bring these positions up or down (you can also do this on Excel, it just takes a little longer).
Once this is figured out, most trading software platforms can automatically generate the trades and then you just need to send them to a program for trading. We use program trading because generally when you rebalance a portfolio it's a small amount of shares (percentage wise), but possibly hundreds of trades. With program trading we basically send all the orders to a program and it gets all the trades done. We just have to sit back and wait....I wish! We have to monitor the positions and trades to make sure things go smoothly, but using programs definitely saves some time.
Thursday, July 06, 2006
It's been awhile
I haven't been on my laptop for awhile, that's my reason for my lack of posts.
I calculated my June end of month net worth and I was pretty disappointed. I thought this was going to be the month to pass the $50,000 mark but I had way too many expenses and I ended the month at $49,150. I fell way short of my monthly goal, but I think I'll be on track for this month. I also have a few more things to sell on eBay and I think this could bring in another $100.
In a few months I'll be able to invest in a 401(k), so I will post more about this once I get more information. The max I can do is $15,000 per year and I think I might be able to pull this off if I use some of my bonus money. Although my company doesn't match, I do get the benefit of reducing my taxable income. Actually this combined with my IRA, my taxable income might be really low (hey! another refund!).
I started trading a few weeks ago at work and it's going very well. I don't think about how much money I'm spending, I just concentrate on completing the trades. I still triple-check my trade order before I push any buttons though! I'll probably write a more detailed post about this later as well.
Also, I casually mentioned that my friends and I are starting a website. Well that's growing into two related websites and nothing is complete yet so I won't go into details. I think they will be fun sites and our goal is to generate enough ad revenue to cover apartment rent. It's going to take awhile because the site will mainly be for the San Francisco Bay Area, but we're going to give it a shot.
I wish I had more web/programming skills because I think it's easier to at least start new ventures. Right now I have ideas and I have to run it by some friends to see if it's do-able.
I calculated my June end of month net worth and I was pretty disappointed. I thought this was going to be the month to pass the $50,000 mark but I had way too many expenses and I ended the month at $49,150. I fell way short of my monthly goal, but I think I'll be on track for this month. I also have a few more things to sell on eBay and I think this could bring in another $100.
In a few months I'll be able to invest in a 401(k), so I will post more about this once I get more information. The max I can do is $15,000 per year and I think I might be able to pull this off if I use some of my bonus money. Although my company doesn't match, I do get the benefit of reducing my taxable income. Actually this combined with my IRA, my taxable income might be really low (hey! another refund!).
I started trading a few weeks ago at work and it's going very well. I don't think about how much money I'm spending, I just concentrate on completing the trades. I still triple-check my trade order before I push any buttons though! I'll probably write a more detailed post about this later as well.
Also, I casually mentioned that my friends and I are starting a website. Well that's growing into two related websites and nothing is complete yet so I won't go into details. I think they will be fun sites and our goal is to generate enough ad revenue to cover apartment rent. It's going to take awhile because the site will mainly be for the San Francisco Bay Area, but we're going to give it a shot.
I wish I had more web/programming skills because I think it's easier to at least start new ventures. Right now I have ideas and I have to run it by some friends to see if it's do-able.
Wednesday, June 28, 2006
An Important Ratio
Many financial/personal finance magazines tend to highlight only a few particular financial ratios. The most talked about one is the P/E ratio. This tends to be something that is easy to understand and has been widely used for years. It also tends to be a financial ratio that can be manipulated by management (i.e.- managing earnings). This is one reason why some people also use other ratios like the P/S (price to sales) ratio because Sales are a little harder to manipulate.
While these ratios are important, another important ratio is EV/EBITDA
Lots of letters there, so let's get through it:
EV stands for Enterprise Value. Think of the enterprise value as the amount someone would need to pay to takeover the company. It's a relatively easy ratio to compute: take the stock's market capitalization (price x shares), add in debt, add in preferred stock, then subtract out cash and cash equivalents.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization
This figure eliminates the effects of financing. For most income statements, you can see the value if you take sales and subtract out cost of goods sold and selling/admin expenses.
Now we just have to put everything together. Take the enterprise value and divide that by EBITDA. A "good" number is something under 10. Basically the lower the number, the more the stock is considered a value play.
While these ratios are important, another important ratio is EV/EBITDA
Lots of letters there, so let's get through it:
EV stands for Enterprise Value. Think of the enterprise value as the amount someone would need to pay to takeover the company. It's a relatively easy ratio to compute: take the stock's market capitalization (price x shares), add in debt, add in preferred stock, then subtract out cash and cash equivalents.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization
This figure eliminates the effects of financing. For most income statements, you can see the value if you take sales and subtract out cost of goods sold and selling/admin expenses.
Now we just have to put everything together. Take the enterprise value and divide that by EBITDA. A "good" number is something under 10. Basically the lower the number, the more the stock is considered a value play.
Tuesday, June 27, 2006
Ouch
Another bad day where the markets fell by roughly 1%. The day started off fairly well and then went downhill from there. My cash percentage is still a big percentage and I will hopefully have time to start investing that a little more. I read two old articles that got my interest today. One was in a Barron's from about a month ago about commodities and how it's a good hedge against stock positions. They also noted a few studies that showed over the long run a diversified commodity portfolio produced results that came close to the S&P return, but with lower risk. It also noted that when stocks go through periods of downtimes commodities outperform and when stocks are up commodities are down.
The other article I read highlighted an option fund. It mainly used covered call strategies and had an average annual return of about 16% over the past four years. I really think options can become a good part of my overall portfolio. Right now I just re-started Options As A Strategic Investment and after I get through this one I'm going to re-read Option Volatility & Pricing. I think, in terms of authors, McMillan and Natenberg are really good. Hull has wrote what many consider the bible of derivatives, but I have not bought that one yet (it's on my list though).
The other article I read highlighted an option fund. It mainly used covered call strategies and had an average annual return of about 16% over the past four years. I really think options can become a good part of my overall portfolio. Right now I just re-started Options As A Strategic Investment and after I get through this one I'm going to re-read Option Volatility & Pricing. I think, in terms of authors, McMillan and Natenberg are really good. Hull has wrote what many consider the bible of derivatives, but I have not bought that one yet (it's on my list though).
Thursday, June 22, 2006
Oracle
Today Oracle made the headlines by reporting stronger than expected revenue. To me, this seems like one of the few tech giants that's actually going forward at a robust pace. They are growing through acquisitions, but the important thing is that they seem to be making these acquisitions work. The merging of two companies can turn out to be a costly mistake, but ORCL seems to be making their purchases work. The other news story is that they are taking market share away from SAP and IBM. Depending on the product line, SAP is a strong competitor with a nice-sized market share. It will be interesting to see their earnings when they report on July 20th.
Oracle is also continuing their stock buyback program, but I haven't read or looked into the net effect of their buybacks. Some companies issue press releases stating they are starting a $X buyback program. Some people view this as good news, while others view it as poor news. It all depends on the company and the sector. If a slowly growing company is buying back stock that can be seen as a good thing, but if a really fast growing company is buying stock that can be seen as a bad move because it should be investing its money internally. Anyway, back to my point. A company might state a big buyback but after you take into account shares given for options andn shares as part of acquisitions (they might buy a company for 80% cash and 20% stock), the net effect of the buyback might not be all that spectacular.
I didn't see anything mentioned with ORCL, but I'll be on the look out.
Oracle is also continuing their stock buyback program, but I haven't read or looked into the net effect of their buybacks. Some companies issue press releases stating they are starting a $X buyback program. Some people view this as good news, while others view it as poor news. It all depends on the company and the sector. If a slowly growing company is buying back stock that can be seen as a good thing, but if a really fast growing company is buying stock that can be seen as a bad move because it should be investing its money internally. Anyway, back to my point. A company might state a big buyback but after you take into account shares given for options andn shares as part of acquisitions (they might buy a company for 80% cash and 20% stock), the net effect of the buyback might not be all that spectacular.
I didn't see anything mentioned with ORCL, but I'll be on the look out.
Wednesday, June 21, 2006
A bounce
The markets had a pretty good day today with each of the major indices increasing almost 1%. As the day went on the markets got stronger, ending with a slight sell-off but maintaining the majority of its gains.
One of the technicals I do like to use is the 50 day moving average. I think it's a useful indicator to hightlight bottoms and tops when it comes to longer term trends and dealing with indexes. Many people do use 50day MA's with stocks, but I also find that overall the volatility adds some noise into the data. With an index there seems to be a general band that the stock trades within. I haven't had time to update my studies on this, but the last time I gathered data I remember that the S&P usually traded within +/- 3% of it's 50day MA. When it got past these extremes it was a signal that it was going to top/bottom out pretty soon. The Nasdaq is more volatile and I think the band for that was about +/-5.5%. In one of my earlier posts I noted that I was surprised the Nasdaq was over 7% below it's 50 day MA, which would be a strong signal that a bottom is near.
I don't have the exact 50day MA number with me, but it seems that the Naz is now under 5% from it's MA. The one thing that can skew this is that now we should expect the 50 day moving average to continue to decline because of the sharp sell-offs that just happened recently. But if the Nasdaq declines less than the 50 day MA decline, it would appear to get closer to -4% from it's moving average.
I'm getting caught up on work (finally!) so if I get a chance to update my sheets, I'll post some of the results.
One of the technicals I do like to use is the 50 day moving average. I think it's a useful indicator to hightlight bottoms and tops when it comes to longer term trends and dealing with indexes. Many people do use 50day MA's with stocks, but I also find that overall the volatility adds some noise into the data. With an index there seems to be a general band that the stock trades within. I haven't had time to update my studies on this, but the last time I gathered data I remember that the S&P usually traded within +/- 3% of it's 50day MA. When it got past these extremes it was a signal that it was going to top/bottom out pretty soon. The Nasdaq is more volatile and I think the band for that was about +/-5.5%. In one of my earlier posts I noted that I was surprised the Nasdaq was over 7% below it's 50 day MA, which would be a strong signal that a bottom is near.
I don't have the exact 50day MA number with me, but it seems that the Naz is now under 5% from it's MA. The one thing that can skew this is that now we should expect the 50 day moving average to continue to decline because of the sharp sell-offs that just happened recently. But if the Nasdaq declines less than the 50 day MA decline, it would appear to get closer to -4% from it's moving average.
I'm getting caught up on work (finally!) so if I get a chance to update my sheets, I'll post some of the results.
Monday, June 19, 2006
An expensive weekend
Well I really didn't hold back this weekend in terms of spending! I think I spent close to $150 on movies and groceries/Target stuff. That wasn't too bad, but then another $140 was spent on father's day. I also bought five concert tickets for two concerts and that came out to almost $300.
I'm going to get paid back for three of the tickets (since two are for me), but it's still money flowing out!
My biggest purchase had to be my new digital camera. I have a 3 megapixel right now, but while I think it takes great pictures it was getting too big for me. Compared to the compact digital cameras out now, my camera is huge (it's a canon powershot a75). So I decided to sell that one (if anyone is interested email me and I'll sell it for cheap) and got a new Canon. I went with the Canon SD600 because it's compact, but not as pricey as some of the other models. I don't need the extra features that the other ones had so I saved a little bit of money. Then I ended up buying a 2 gig media card so I can hold tons of pictures and video. This will come in handy because I'll be able to take video of the concerts I go to and I'm about 90% sure I'm going to Europe later this year so I will definitely take tons of pictures.
We're planning to go to: London, Paris, Germany and possible one more place.
I'm going to get paid back for three of the tickets (since two are for me), but it's still money flowing out!
My biggest purchase had to be my new digital camera. I have a 3 megapixel right now, but while I think it takes great pictures it was getting too big for me. Compared to the compact digital cameras out now, my camera is huge (it's a canon powershot a75). So I decided to sell that one (if anyone is interested email me and I'll sell it for cheap) and got a new Canon. I went with the Canon SD600 because it's compact, but not as pricey as some of the other models. I don't need the extra features that the other ones had so I saved a little bit of money. Then I ended up buying a 2 gig media card so I can hold tons of pictures and video. This will come in handy because I'll be able to take video of the concerts I go to and I'm about 90% sure I'm going to Europe later this year so I will definitely take tons of pictures.
We're planning to go to: London, Paris, Germany and possible one more place.
Monday, June 12, 2006
What magazines to read?
I often get emails asking what financial websites people should check out to learn more about investing. Lately I've received a few emails about magazines, so I thought to sum things up in a post.
I generally prefer to read things on paper rather than online content and I know others feel the same way. For the list below, I would recommend buying one or two issues and see how you like them. If you like the magazine, then you might as well subscribe to them because it will be cheaper in the long run.
The first two magazines I would start off with are: Smart Money and Bloomberg's Personal Finance magazine. Both have articles about investing and personal finance and I probably like Smart Money a little more.
Once you get a little more familiar with things, I would suggest a subscription to Barron's. Barron's is a newspaper that comes out once per week and has a ton of information. They have great weekly recaps and specific stories highlighting stocks.
After Barron's I think Business Week is the best choice. This weekly magazine does not give as much financial data as Barron's, but it gives you more business stories. I think it's a great magazine and it sums up the major stories of the week, while writing about stocks and industries.
If you're up for even more reading then it's time to move on to the Wall Street Journal. Of course this is a daily newspaper and you will have all the info on the important business and political stories.
Another magazine I like that leans a little more toward politics/policy is The Economist. I don't think this is a magazine for people just starting off about investing, but it's worth it for other investors.
It seems like a lot of reading and it is! Most of the people I know read all of the above plus specific trade journals and other financial newspapers (like the Financial Times).
One more: for those interested more on the academic side of investing/business I would suggest The Journal of Finance. I've been subscribing for awhile and this Journal has been around for decades.
I generally prefer to read things on paper rather than online content and I know others feel the same way. For the list below, I would recommend buying one or two issues and see how you like them. If you like the magazine, then you might as well subscribe to them because it will be cheaper in the long run.
The first two magazines I would start off with are: Smart Money and Bloomberg's Personal Finance magazine. Both have articles about investing and personal finance and I probably like Smart Money a little more.
Once you get a little more familiar with things, I would suggest a subscription to Barron's. Barron's is a newspaper that comes out once per week and has a ton of information. They have great weekly recaps and specific stories highlighting stocks.
After Barron's I think Business Week is the best choice. This weekly magazine does not give as much financial data as Barron's, but it gives you more business stories. I think it's a great magazine and it sums up the major stories of the week, while writing about stocks and industries.
If you're up for even more reading then it's time to move on to the Wall Street Journal. Of course this is a daily newspaper and you will have all the info on the important business and political stories.
Another magazine I like that leans a little more toward politics/policy is The Economist. I don't think this is a magazine for people just starting off about investing, but it's worth it for other investors.
It seems like a lot of reading and it is! Most of the people I know read all of the above plus specific trade journals and other financial newspapers (like the Financial Times).
One more: for those interested more on the academic side of investing/business I would suggest The Journal of Finance. I've been subscribing for awhile and this Journal has been around for decades.
Thursday, June 08, 2006
Time for junk?
I came across a few articles lately that basically said a small allocation in junk bonds might not be such a bad thing. I definitely think the safer way might be through a fund, unless you do a lot of research into a particular fund. I checked out a few junk bonds and some of their charts are actually pretty attractive, plus they are on the plus side for the year. Some of them yield in the 8-10% range, but some of these are also trading at big premiums to their net asset values (NAV).
With the markets being down it's time to do a few things. If you're a long term investor then this is becoming a good time for you. It takes patience, but I suggest to spend some time researching companies. Some companies are just being brought down because of the market, fear, and macroeconomic variables. These companies are starting to become cheap (I think MSN money highlighted Coke -KO- today). If you're a shorter term trader, it might be time to branch out into some different asset classes. All the top performing etf's for the year have to do with foreign stocks. Lower market cap stocks (small caps, micro caps) tend to have less systematic/market risk on average, but more volatility. It would be interesting to see if some of the better performers of the last few weeks are in this category.
One last data: earlier today the markets were selling off and I noticed the Naz was trading at a 7.2% discount to its 50 day moving average. I don't remember seeing it that low in years!
With the markets being down it's time to do a few things. If you're a long term investor then this is becoming a good time for you. It takes patience, but I suggest to spend some time researching companies. Some companies are just being brought down because of the market, fear, and macroeconomic variables. These companies are starting to become cheap (I think MSN money highlighted Coke -KO- today). If you're a shorter term trader, it might be time to branch out into some different asset classes. All the top performing etf's for the year have to do with foreign stocks. Lower market cap stocks (small caps, micro caps) tend to have less systematic/market risk on average, but more volatility. It would be interesting to see if some of the better performers of the last few weeks are in this category.
One last data: earlier today the markets were selling off and I noticed the Naz was trading at a 7.2% discount to its 50 day moving average. I don't remember seeing it that low in years!
Monday, June 05, 2006
Where's my $9,842?
I just came across a site, leapfish.com, where it attempts to value your site/blog based on certain factors like the number of search results from Yahoo and Google and how long the domain name is (I got points taken off for having a longer name).
It creates two values: an estimated base value and an estimated actual value. The base value is the minimum the site is worth and the actual value is based on the factors combined with recent web site sales. My actual value turned out to be $9,842 so if you want to write that check, click the email button and I'll let you know who to make it out to!
This reminds me of another finance site from about one year ago. I forgot the name of the site, but it was a rather popular finance site. Apparently someone offered the two writers $2000 for their blog and they sold it. The buyer promised to continue the blog and offer many new things (new writers, etc.). A few weeks go by and nothing updates. Then a little over a month goes by and people start to realize that the site is dead. Some guy paid $2000 for the site and did nothing with it! Talk about a waste of money.
It creates two values: an estimated base value and an estimated actual value. The base value is the minimum the site is worth and the actual value is based on the factors combined with recent web site sales. My actual value turned out to be $9,842 so if you want to write that check, click the email button and I'll let you know who to make it out to!
This reminds me of another finance site from about one year ago. I forgot the name of the site, but it was a rather popular finance site. Apparently someone offered the two writers $2000 for their blog and they sold it. The buyer promised to continue the blog and offer many new things (new writers, etc.). A few weeks go by and nothing updates. Then a little over a month goes by and people start to realize that the site is dead. Some guy paid $2000 for the site and did nothing with it! Talk about a waste of money.
Wednesday, May 31, 2006
Month end review
I haven't posted in awhile due to lack of time. Things have been incredibly busy lately at work and I haven't had too much free time because of other activities. Since I've been too busy to look for new stocks, I've been sitting on a good amount of cash and that proved to be a good move for this month. Most of the indexes lost their gains or only up marginally. For the year I'm still up, but I need to calculate my performance. Once I get some free time I'm going to use a time-weighted return and I'll hopefully post about this soon.
I did manage to get a copy of the S&P 600 small cap directory, so I will look through that within the next week or so. I've already skimmed through some companies and I know I'm definitely not going to look further into some of the service companies. Some of these companies don't produce anything, they just find the best service for you (tech companies). I don't see the big deal about this, and it just seems like an industry that can change way too dramatically.
Anyway, back to the May month end review.
I ended this month with a bigger than normal gain because of a few things. I have been keeping my expenses in line and I think everyone can do this if they just stick to a plan. Check out NCN's blog as he went from a good amount of debt to savings with thousands of dollars. It didn't even take him that long to reverse things because he had a plan and stuck to it.
Since I didn't work the last few months while I graduated/looked for a job I ended up getting a big tax refund. This is definitely a one-time thing and I think next year my taxes are going to get a little more hectic.
My end net worth is: $48,637
This turns out to be 6.76% more than last month. The year started with a slower growth rate and now things have started to pick up a bit. This also means that next month I should hit a nice figure: $50,000
It's probably not a lot of money for some people, but to me that is a very nice number!
I did manage to get a copy of the S&P 600 small cap directory, so I will look through that within the next week or so. I've already skimmed through some companies and I know I'm definitely not going to look further into some of the service companies. Some of these companies don't produce anything, they just find the best service for you (tech companies). I don't see the big deal about this, and it just seems like an industry that can change way too dramatically.
Anyway, back to the May month end review.
I ended this month with a bigger than normal gain because of a few things. I have been keeping my expenses in line and I think everyone can do this if they just stick to a plan. Check out NCN's blog as he went from a good amount of debt to savings with thousands of dollars. It didn't even take him that long to reverse things because he had a plan and stuck to it.
Since I didn't work the last few months while I graduated/looked for a job I ended up getting a big tax refund. This is definitely a one-time thing and I think next year my taxes are going to get a little more hectic.
My end net worth is: $48,637
This turns out to be 6.76% more than last month. The year started with a slower growth rate and now things have started to pick up a bit. This also means that next month I should hit a nice figure: $50,000
It's probably not a lot of money for some people, but to me that is a very nice number!
Thursday, May 25, 2006
What is that?
I saw this incredibly odd color on my screen today....it was green.
The major indices had a relatively strong day (Naz and S&P) were up over 1%.
I remembered one thing I learned a few weeks ago and I wanted to share it.
Have you ever had some stocks that just open sharply down and wonder why? I see many people post messages saying it's the specialists ("they are crooks", etc.), but I wanted to explain one particular reason. The stock could go down in after-hours due to some bad news, but there's anothe reason that would be hard for the individual investor to spot.
Let's say there is no news, barely any after hours trading, and yet the stock still opens down 2.5%
What happened?
Here is one reason: suppose a major investor (or even the CEO) wants to sell a big chunk of their holdings. If they try to sell 1 million shares on a stock with an average volume of 300,000- well this is going to take days/weeks for them to get out of the position. Plus, all their selling can drive the price down which is something they do not want. One way to go around this is to call up some institutions. The CEO goes to Goldman Sachs (or whoever) and says "the price right now is $20, I need to sell my 1 million shares and I could go as low as $19.50"
Goldman then starts calling up other big places to drum up some buying interest. Their goal is to find people who are willing to buy the 1 million shares (either one party, or a group of parties) and for doing this they get the discount on the price. So these other big places will buy the shares for 19.50. Now here's the part the individual investor doesn't see: the movement of shares.
This transaction won't show up on the time and sales because of the way it went through. Then most of the time the price will open lower (around 19.50, not necessarily 19.50) for what seems like no apparent reason.
The major indices had a relatively strong day (Naz and S&P) were up over 1%.
I remembered one thing I learned a few weeks ago and I wanted to share it.
Have you ever had some stocks that just open sharply down and wonder why? I see many people post messages saying it's the specialists ("they are crooks", etc.), but I wanted to explain one particular reason. The stock could go down in after-hours due to some bad news, but there's anothe reason that would be hard for the individual investor to spot.
Let's say there is no news, barely any after hours trading, and yet the stock still opens down 2.5%
What happened?
Here is one reason: suppose a major investor (or even the CEO) wants to sell a big chunk of their holdings. If they try to sell 1 million shares on a stock with an average volume of 300,000- well this is going to take days/weeks for them to get out of the position. Plus, all their selling can drive the price down which is something they do not want. One way to go around this is to call up some institutions. The CEO goes to Goldman Sachs (or whoever) and says "the price right now is $20, I need to sell my 1 million shares and I could go as low as $19.50"
Goldman then starts calling up other big places to drum up some buying interest. Their goal is to find people who are willing to buy the 1 million shares (either one party, or a group of parties) and for doing this they get the discount on the price. So these other big places will buy the shares for 19.50. Now here's the part the individual investor doesn't see: the movement of shares.
This transaction won't show up on the time and sales because of the way it went through. Then most of the time the price will open lower (around 19.50, not necessarily 19.50) for what seems like no apparent reason.
Tuesday, May 23, 2006
Another down day
Well the markets were choppy and ended the day in the red. I wanted to say a few comments about the market and the blow-ups happening in some of the emerging markets, but a piece in Barron's caught my eye.
I was scanning through the new issue and there's a table with the first quarter winners in terms of institutional and retail money managers. Some of these returns were fantastic. They had columns for quarterly returns, 1 year annualized, and 3 year annualized returns. I was more impressed with the 3 year column. Here are some of the big ones (3 year): Insight Small Cap Growth (45%), NorthPointe Small Cap Growth (41.47%), Globalvest Latin America (45.4%), Strategic Corp Long Only (60%), and Ironwood Small Value (50.6%).
Now, when I have time, I want to check into these funds to find any available information. Sometimes funds put the core part of their strategy on their website, and it will be interesting to see what these funds say.
Small cap is the major theme.
I was scanning through the new issue and there's a table with the first quarter winners in terms of institutional and retail money managers. Some of these returns were fantastic. They had columns for quarterly returns, 1 year annualized, and 3 year annualized returns. I was more impressed with the 3 year column. Here are some of the big ones (3 year): Insight Small Cap Growth (45%), NorthPointe Small Cap Growth (41.47%), Globalvest Latin America (45.4%), Strategic Corp Long Only (60%), and Ironwood Small Value (50.6%).
Now, when I have time, I want to check into these funds to find any available information. Sometimes funds put the core part of their strategy on their website, and it will be interesting to see what these funds say.
Small cap is the major theme.
Thursday, May 18, 2006
Expenses and a few blow-ups
I somehow have managed to spend over $600 this month on concert tickets. Now I did buy tickets for friends, so I haven't received that money yet, but my expenses for this month are going to be a little messed up. I might sell a few on eBay depending on my schedule, but as of right now I'm going to use them all. I have to watch my spending for the rest of the month in order to meet my savings goal. I did receive my federal tax refund, so this will help for this month.
The indices have gone through a rough couple of days. The S&P lost the majority of its gains (it's up about 1.08% YTD) while the Naz is down 1.13% for the year.
I've gone through a few blow-ups in my portfolio that has sent my portfolio down. What was on track to being a great year (in terms of my returns vs the S&P) is now just an okay year. I'm still beating the index, but I've lost a good amount of gains. I had two stocks decline over 10% in a day, and one down 4% or so. It hasn't been too fun and I might sell one due to a change in fundamentals. This means I'll take a loss and I haven't done that in a long time. This definitely doesn't change my outlook though. If I think the stock is bad, then I'll sell it and take the loss!
I'm going to take it easy the next week and then after that I will start looking for more investments. Some stocks should appear to look cheap because they have been dragged down by the markets. I'm going to actively look for more foreign stocks, no tech stocks, stocks with stable dividends, and small/mid-cap stocks. I will also look into the consumer sector.
Overall, I think a blend of these combinations will be best for me. I'll have some stability, generate some income, be hedged against the U.S., and hopefully find some alpha producing opportunities in lesser known names.
I also added the Investing Idea blog.
The indices have gone through a rough couple of days. The S&P lost the majority of its gains (it's up about 1.08% YTD) while the Naz is down 1.13% for the year.
I've gone through a few blow-ups in my portfolio that has sent my portfolio down. What was on track to being a great year (in terms of my returns vs the S&P) is now just an okay year. I'm still beating the index, but I've lost a good amount of gains. I had two stocks decline over 10% in a day, and one down 4% or so. It hasn't been too fun and I might sell one due to a change in fundamentals. This means I'll take a loss and I haven't done that in a long time. This definitely doesn't change my outlook though. If I think the stock is bad, then I'll sell it and take the loss!
I'm going to take it easy the next week and then after that I will start looking for more investments. Some stocks should appear to look cheap because they have been dragged down by the markets. I'm going to actively look for more foreign stocks, no tech stocks, stocks with stable dividends, and small/mid-cap stocks. I will also look into the consumer sector.
Overall, I think a blend of these combinations will be best for me. I'll have some stability, generate some income, be hedged against the U.S., and hopefully find some alpha producing opportunities in lesser known names.
I also added the Investing Idea blog.
Monday, May 15, 2006
The Tech Sector
I read a few articles over the weekend and that got me thinking about the tech sector. What's going to fuel the growth in this sector (consumer tech)? This growth is fueled on innovation, but it seems that we're being saturdated by this innovation. The other factor is that one of the characteristics of this sector is that prices almost always go down. Other sectors can kind of go along with the economy, but with this sector the price today compared to the price 6 months from now will be different.
Over the past few decades we have come up with some nice products.
Computers: the market is getting saturated (look at Dell), you can buy a laptop for under $400, and while some people say that the growth will be through replacements I'm not too sure. I'm using a one year old laptop right now. The laptops out today will blow mine away, but do I need this? Only a small percentage of us use the maximum power of our laptops. We don't run heavily intensive programs! Yes, the new laptops can hold more (but I still have 13 gigs on my hard drive) and programs will load faster (a few seconds...).
LCDs: these are catching on huge and the prices are dropping. Many suppliers are going the route of selling as much as they can at lower profit margins. As the prices continue to drop, some of these producers will get squeezed.
Music playing devices: the iPod has to be one of the fastests products to penetrate mainstream America. It seems like every other person has an iPod (also, some articles note that they have an 80%+ market share). What will they come up with next?
Here's what I want to see: Sirius + iPod. Sirius is coming out (or already have) a portable radio. Wouldn't it be cool if they could shrink it down to almost the size of an iPod and have a built in flash drive to carry music? Then you could have commercial free radio + music.
One off the subject note, but still semi-related. I just read that the 2007 Infinity G35 will come with a 9.5 gig hard drive to rip music. I really like the G35 and catch myself looking up how much the potential monthly payment will be (around $500/month).
Over the past few decades we have come up with some nice products.
Computers: the market is getting saturated (look at Dell), you can buy a laptop for under $400, and while some people say that the growth will be through replacements I'm not too sure. I'm using a one year old laptop right now. The laptops out today will blow mine away, but do I need this? Only a small percentage of us use the maximum power of our laptops. We don't run heavily intensive programs! Yes, the new laptops can hold more (but I still have 13 gigs on my hard drive) and programs will load faster (a few seconds...).
LCDs: these are catching on huge and the prices are dropping. Many suppliers are going the route of selling as much as they can at lower profit margins. As the prices continue to drop, some of these producers will get squeezed.
Music playing devices: the iPod has to be one of the fastests products to penetrate mainstream America. It seems like every other person has an iPod (also, some articles note that they have an 80%+ market share). What will they come up with next?
Here's what I want to see: Sirius + iPod. Sirius is coming out (or already have) a portable radio. Wouldn't it be cool if they could shrink it down to almost the size of an iPod and have a built in flash drive to carry music? Then you could have commercial free radio + music.
One off the subject note, but still semi-related. I just read that the 2007 Infinity G35 will come with a 9.5 gig hard drive to rip music. I really like the G35 and catch myself looking up how much the potential monthly payment will be (around $500/month).
Thursday, May 11, 2006
A Sea of Red
All the major indices were down over 1% or more for the day. It was just a wave of selling after selling. Some of the decline has to do with surging commodities as gold continued to soar (it's now $725 an ounce!) as well as copper. I read a joke somewhere (hey who knows, it might be true) that the pennies made before 1980 are now worth 2 cents!
Oil also reached $73 a barrel, but I've noticed a drop in gas prices around here. It will be interesting to see the sales figures for hybrid cars. I read that Lexus came out with a hybrid suv (I think) and it's only about $2000 more than the normal version. This seems like a good deal because you will save at least a few hundred dollars per year on gas and you might get some other breaks depending on where you live. Some of the perks I've seen before is that you can drive in car pool lanes even if it's one person (saves time, time = money) and some cities were offering free parking in certain lots. I'm still waiting for that Honda fuel-cel car. I think a few years ago they built the first one and gave it to a family to test, but that's the last I've heard of it.
My portfolio actually finished up today (and beat the S&P by 1.5%) all because of Jones Soda. It finished the day up 10.68% on really heavy volume- around four times the 3 month average. Generally when a stock shows that much gains on that heavy a volume, this is a great sign. If the volume doesn't pick up tomorrow, I would expect a drop though like CUP did today (down 6%).
Oil also reached $73 a barrel, but I've noticed a drop in gas prices around here. It will be interesting to see the sales figures for hybrid cars. I read that Lexus came out with a hybrid suv (I think) and it's only about $2000 more than the normal version. This seems like a good deal because you will save at least a few hundred dollars per year on gas and you might get some other breaks depending on where you live. Some of the perks I've seen before is that you can drive in car pool lanes even if it's one person (saves time, time = money) and some cities were offering free parking in certain lots. I'm still waiting for that Honda fuel-cel car. I think a few years ago they built the first one and gave it to a family to test, but that's the last I've heard of it.
My portfolio actually finished up today (and beat the S&P by 1.5%) all because of Jones Soda. It finished the day up 10.68% on really heavy volume- around four times the 3 month average. Generally when a stock shows that much gains on that heavy a volume, this is a great sign. If the volume doesn't pick up tomorrow, I would expect a drop though like CUP did today (down 6%).
Wednesday, May 10, 2006
Another Increase
Today the Fed raised interest rates for the 16th straight time to 5%. The markets acted with some volatility, but did not drop too much. The Nasdaq did drop 0.75%, which is a big amount, but the S&P and Dow held steady.
I think I might have found a few stocks worth looking into, which is a good thing so I can put some cash to work. Lately I've been seeing some of my other picks go up and I'm kicking myself for not investing. I highlighted a risky company awhile back, CUP, when it was around $3. It went down and I almost talked myself into 1000 shares at around $2.20. I didn't end up buying, and in a relatively short amount of time it has gone up over 100%. Today it finished up 17% and it's up another 3% in after-hours. It's getting somewhat close to their project's NPV (which doesn't kick in till 2009-2010), so there's definitely some downside risk.
In other news, I made a relatively small eBay sale but profit is profit. I have roughly three more items (possibly a fourth) so this will bring in some extra cash.
As of right now things are going along fairly slowly. I'm saving a good amount, my portfolio is up a decent amount, and I've had some other smaller sources of income. It's been a long stretch to reach $50,000 (a nice milestone), but I think I will get there within a few months (although I might have been there if I bought some CUP!)
I think I might have found a few stocks worth looking into, which is a good thing so I can put some cash to work. Lately I've been seeing some of my other picks go up and I'm kicking myself for not investing. I highlighted a risky company awhile back, CUP, when it was around $3. It went down and I almost talked myself into 1000 shares at around $2.20. I didn't end up buying, and in a relatively short amount of time it has gone up over 100%. Today it finished up 17% and it's up another 3% in after-hours. It's getting somewhat close to their project's NPV (which doesn't kick in till 2009-2010), so there's definitely some downside risk.
In other news, I made a relatively small eBay sale but profit is profit. I have roughly three more items (possibly a fourth) so this will bring in some extra cash.
As of right now things are going along fairly slowly. I'm saving a good amount, my portfolio is up a decent amount, and I've had some other smaller sources of income. It's been a long stretch to reach $50,000 (a nice milestone), but I think I will get there within a few months (although I might have been there if I bought some CUP!)
Monday, May 08, 2006
Jones Soda transcript
I got a chance to read over the transcript for JSDA's last conference call and it was good. Of course it highlighted the areas in the press release (27% increase in Q1 revenue, 310 basis points improvement in gross margin), and included a q&a section.
The overall theme though was to only put out limited information. They kept their answers short and would not expand in certain topics. For instance they used to break down their sales figures into a little more detail, but not going any further. I'm assuming the reason for this might be because of their Target relationship. They are in discussions regarding the extension of their agreement and it appears that the lack of sales data might have something to do with the discussions.
The highlight was Jones Organics (still makes up a small percentage) and well as the Valentines Day success. They also really improved their balance sheet. The cash position is healthy now (last quarter was a little low). I think they also mentioned a southwest production plant. This will increase costs in the short run, but decrease costs (like transportation) in the long run.
There wasn't really anything exciting about the q&a session. Capex was $21,000 while cash flow from operations was $1,069,000. This will get you a free cash flow of $1,048,000.
The one semi-surprising note was that Jeff Canter (who follows the company) actually had only positive things to say. He seems to rely heavily on cash flow (free cash flow, cash flow from ops), so he really liked this quarter. Here's a quote from him: "I think your free cash flow generated in the quarter was greater than your cumulative free cash flow from 2001 through 2005, and hopefully that's a trend that will continue." He seemed impressed with the results.
Overall it was a good conference call.
The overall theme though was to only put out limited information. They kept their answers short and would not expand in certain topics. For instance they used to break down their sales figures into a little more detail, but not going any further. I'm assuming the reason for this might be because of their Target relationship. They are in discussions regarding the extension of their agreement and it appears that the lack of sales data might have something to do with the discussions.
The highlight was Jones Organics (still makes up a small percentage) and well as the Valentines Day success. They also really improved their balance sheet. The cash position is healthy now (last quarter was a little low). I think they also mentioned a southwest production plant. This will increase costs in the short run, but decrease costs (like transportation) in the long run.
There wasn't really anything exciting about the q&a session. Capex was $21,000 while cash flow from operations was $1,069,000. This will get you a free cash flow of $1,048,000.
The one semi-surprising note was that Jeff Canter (who follows the company) actually had only positive things to say. He seems to rely heavily on cash flow (free cash flow, cash flow from ops), so he really liked this quarter. Here's a quote from him: "I think your free cash flow generated in the quarter was greater than your cumulative free cash flow from 2001 through 2005, and hopefully that's a trend that will continue." He seemed impressed with the results.
Overall it was a good conference call.
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