Tuesday, April 14, 2009

I love the StockTwits…

Written by: andrew.giovinazzi

It is fascinating stuff to an old option trader. Mostly because it helps monitor the flow and velocity of all market participants. Thank you web 2.0.

To that end my growing company, Aqumin, has created a TweetScore (High TweetScore in Blue and Green, low in red, sorted by Stock Volume) to combine what is Twittered about with real-time information. For me I call this a leading (contra) indicator. Not perfect, but a great source of ideas.

What I like about AlphaVision is I can take a Tweet and find the other trade. For instance look at Amazon (AMZN) which produces a very high TweetScore. Everyone is talking about it and it is a great company but it trades at a crazy multiple (50+P/E). I have seen enough to know that the new buzzwords “cloud computing” (used to be Railroads, Internet, Biotech, Xerox….etc) scare me with these kinds of names. Not that AMZN cannot go higher but give me something else to buy. So I use AlphaVision to find something in the same sector. Netflix (NFLX) pops up but that is no bargain either in the single digit P/E world. But Ebay (EBAY) sticks out. The market hates it (underperformed the S&P 500 of the last 52 Weeks) and trades like a utility (10 P/E).

What is unique about AlphaVision is that it compares names and not just screens them. The whole world is looking a spreadsheet of screens. What the market participant needs now is a way of looking at multiple names, in real time with all transaction data, at one time. Let everyone else screen, with AlphaVision you can compare across multiple sectors and price feeds with various types of data. Now is the time to do something different.

Take a look at Net Margins over the trailing 12 months (TTM). Ebay is 4x as efficient but trades at 1/5 the multiple. With AV this makes the trade much easier.
That is how eBay (EBAY) popped up. No Tweets love it. But it is standing right next to Amazon (AMZN) and that is where the opportunity lies. Buy what everyone else wants (which is good for now) or buy one of the best monopolies on the web for the price of your electricity provider and get Skype in the process.

I am buying eBay (EBAY) tomorrow and holding it until they make big money on Skype. Amazon (AMZN), good company, but it does not have a history of defying gravity forever.

Monday, April 6, 2009

Dipping a toe into the financial waters...

Written by: Andrew Giovinazzi

We go back to the past in terms of marking financial assets as the FASB (Financial Accounting Standards Board) hits the redo button. While there are solid arguments on both sides for relaxing or not relaxing the accounting standard (Steve Forbes will be happy) market liquidity and “fair value” are linked. Right now, there is no liquidity in these asset markets but there are real assets underpinning the securities. Without an active secondary market Mark-to-Market is a guess.

In mature markets with central clearing functions (for example: the OCC handles the clearing function for the option markets which are no stranger to volatility) this is a non issue. Every security closes with a bid and offer that a regulated, properly capitalized market participant is willing to make. Changing FASB is a half solution until a more permanent central clearing function for asset backed securities (ABS) can be established or the USA will be revisiting this problem very soon.

Short term this looks like a halt to the balance sheet rot of the last 12-18 months. While I am not ready to wade into the single digit Banking names just yet I think it is worth focusing on the best financial names now. Here I will use my Solid Dividends and apply it only to all names finance or finance related.

I will sort the market first by Financial Names to narrow down the range. In this case I am looking only at the top end of this group (Blue Stocks). I have sorted by Market Capitalization (big ones) to better see my choices in Big Cap and Small Cap names for a more informed view of how this metric produces results.

The names that stand out are:

The Chubb Corporation (CB)
McGrath RentCorp (MGRC)
Northern Trust Corp (NTRS)
Brown & Brown (BRO)
Royal Bank of Canada (RY)
Wells Fargo & Company (WFC) (from an earlier column)

There are several banks that fit the criteria but most are too small for what I was interested in. Since I think the new FASB standard is marking a market bottom of sorts, my next column will focus on the single digit numbers that look poised to gain from the new accounting largess. Using AlphaVision should give me those names in about 5 minutes but you will have to wait until next week for a look.