***Official*** 2010 Stock Market Thread

[JS80]

JS80, where did you work?

A public print advertising company

 

[SunnyD]

Buy Ford at market open?

I'm smiling at my F that I bought back at $2.60/share.

 

[snoopdoug1]

I'm smiling at my F that I bought back at $2.60/share.

I wish I had followed suit! Nice work!

 

[snoopdoug1]

buy as much as GGP as you can, they will be out of bankrupcy within weeks..my target is $30-40/share, or might get bought out within the next 2yrs.

I might have to look back into this one. I sold a while back for a small profit. Good to hear they're coming out of it well. I thought they had some bidders for them a while back? Did nothing go through?

 

[SSSnail]

What do you guys think of LXK? It dropped 20% today - missed street's target of $1.04bn ($1.02bn even though net income up yoy), CEO retiring in spring 2011 and a weaker outlook - but I think doesn't warrant a 20% drop.

 

[lothar]

buy as much as GGP as you can, they will be out of bankrupcy within weeks..my target is $30-40/share, or might get bought out within the next 2yrs.

I have no intention of increasing/opening a separate stake. I'll let Bruce Berkowitz be the judge of that through FAIRX.
Just curious, how are you getting a $30-40/share target for GGP? Care to share your methodology?

 

[AgaBoogaBoo]

I've got some Aeropostale (ARO) shares, here's my reasoning:

2 things:
1. Credit for bringing this idea to my attention goes to Roark, Rearden, and Hamot Capital Management, I simply dug into it for myself, but the research is really their own
2. SSS = Same Store Sales. If you sell $10 January 2009, but $12 January 2010, that's a 20% SSS increase

Long side:
- Positive SSS leading up to recession, through it, and then following it
- Look at YOY B/S data, they've grown revenue 40% over past 2 years, however inventory has stayed flat, they're managing that really well
- Cash Flow from ops lines up with very well with income statement - earnings are likely of good quality
- Cheap on metrics, 8x 2010 FCF, 10x P/E, etc., versus ANF@ 16x 2010 FCF, P/E on 2010 data is misleading because earnings got killed (Potentially long ARO, short ANF or a basket of the peer group)
- Very clean balance sheet, no long term debt or anything like that, plenty of cash on hand. Metrics improve to 7x FCF and 8-9x Earnings for ARO if you back out their significant cash position

Short case, why it's so cheap:
- Analysts believe people traded down to ARO from ANF and other brands, they will be going back to their brands as soon as consumer incomes rise
- Analysts frequently cite ARO's significant discounting as something that will erode margins
- Not an exciting situation, company is nearing maturity. 900 stores in existence, management believes the optimal amount will be 1000-1100

My counters:
1. If you buy it at a cheap price, it will be priced for both short cases and so if reality falls short of those issues even a little bit, we'll see an upside. If any of the consumers now likes ARO and enjoys wearing it, it's possible that they will stay with the brand or split their shopping between the two stores. I don't think they'll remove the store entirely.
2. They've had significant entire-store discounts for a while, it's what drives people there. It's a part of their strategy to have everything marked down. The numbers we see already have this effect for a long time, it's nothing new, but yes, compared to competitors, they are the ones still "discounting." I believe it's mostly marketing - raise the MSRP, say store is 50% off, etc.
2a (counter to 2) - Their profit margins have been steadily improving for quite a while, that's going to end at some point, so those gains will not continue on a YOY basis. I would assume they face same sourcing pressures that others deal with though, so their cost of manufacturing and sourcing the clothing should move with the market. (Again, go long ARO and short a basket to hedge out these risks)
3. Management actually understands capital allocation and that growing revenue for revenue's sake is not beneficial? This is great, I'd love if every company was this good at it.

 

[intogamer]

I've got some Aeropostale (ARO) shares, here's my reasoning:

2 things:
1. Credit for bringing this idea to my attention goes to Roark, Rearden, and Hamot Capital Management, I simply dug into it for myself, but the research is really their own
2. SSS = Same Store Sales. If you sell $10 January 2009, but $12 January 2010, that's a 20% SSS increase

Long side:
- Positive SSS leading up to recession, through it, and then following it
- Look at YOY B/S data, they've grown revenue 40% over past 2 years, however inventory has stayed flat, they're managing that really well
- Cash Flow from ops lines up with very well with income statement - earnings are likely of good quality
- Cheap on metrics, 8x 2010 FCF, 10x P/E, etc., versus ANF@ 16x 2010 FCF, P/E on 2010 data is misleading because earnings got killed (Potentially long ARO, short ANF or a basket of the peer group)
- Very clean balance sheet, no long term debt or anything like that, plenty of cash on hand. Metrics improve to 7x FCF and 8-9x Earnings for ARO if you back out their significant cash position

Short case, why it's so cheap:
- Analysts believe people traded down to ARO from ANF and other brands, they will be going back to their brands as soon as consumer incomes rise
- Analysts frequently cite ARO's significant discounting as something that will erode margins
- Not an exciting situation, company is nearing maturity. 900 stores in existence, management believes the optimal amount will be 1000-1100

My counters:
1. If you buy it at a cheap price, it will be priced for both short cases and so if reality falls short of those issues even a little bit, we'll see an upside. If any of the consumers now likes ARO and enjoys wearing it, it's possible that they will stay with the brand or split their shopping between the two stores. I don't think they'll remove the store entirely.
2. They've had significant entire-store discounts for a while, it's what drives people there. It's a part of their strategy to have everything marked down. The numbers we see already have this effect for a long time, it's nothing new, but yes, compared to competitors, they are the ones still "discounting." I believe it's mostly marketing - raise the MSRP, say store is 50% off, etc.
2a (counter to 2) - Their profit margins have been steadily improving for quite a while, that's going to end at some point, so those gains will not continue on a YOY basis. I would assume they face same sourcing pressures that others deal with though, so their cost of manufacturing and sourcing the clothing should move with the market. (Again, go long ARO and short a basket to hedge out these risks)
3. Management actually understands capital allocation and that growing revenue for revenue's sake is not beneficial? This is great, I'd love if every company was this good at it.

Observation:
Hipster trend (think Urban Outfitters, American Apparel, H&M, ZARA) is trend I see now. It just hasn't reach into the roots of suburban malls yet, which most of these ANF, AE, ARO stores are in.

 

[Dubb]

Observation:
Hipster trend (think Urban Outfitters, American Apparel, H&M, ZARA) is trend I see now. It just hasn't reach into the roots of suburban malls yet, which most of these ANF, AE, ARO stores are in.

I'd say that trend is passing, probably peaked a couple years ago. I personally wouldn't put much faith in ARO - brand trends being so fickle. But then again I'm pretty bad at picking retail/clothing stocks.

Since going back to school I've only made a few trades. Sold my ORLY when I hit spitting distance of 2x, bought some more CREE when it was in the 40s. Guess I shouldn't have sold the AAPL back in Jan.

I've got some funds waiting for my next bright stock idea, but I'm actually temped to "invest" in rare exotic Nikon camera lenses. Market has been down for a while, but seems to be turning. I wonder if a 300 f/2 or a 6mm fisheye would fit in a large safe deposit box when not in use?

 

[lothar]

I would not touch BAC with a ten foot pole. the culture there is messed up as far as I am concerned.

Care to elaborate on the "culture" part? The only thing I've noticed is they have a culture of being "serial acquirers", however every single business they've acquired besides MBNA, Countrywide, and Merrill has turned out to be excellent.
Sure they did absolutely stupid things such as not allowing Countrywide to go bankrupt so they will be able to buy it's assets on the cheap which would also have removed liability that they are experiencing now...The same with Merrill. If Ken Lewis waited a few more days or a week, he could have had Merrill almost for free. The notion that they were able to conduct "due diligence" in probing Merrill's books within 24 hours is funny.

After watching this several times though, I don't put all the blame on Ken Lewis.
http://www.pbs.org/wgbh/pages/frontline/breakingthebank/

 

[AgaBoogaBoo]

Observation:
Hipster trend (think Urban Outfitters, American Apparel, H&M, ZARA) is trend I see now. It just hasn't reach into the roots of suburban malls yet, which most of these ANF, AE, ARO stores are in.

If you look at the amount of cash they have on hand and how their stores have been performing, the stock is very cheap and that is what my pursuit is - to buy cheap stocks. I don't think they make a style of clothing that is very polarizing and so I don't see them facing significant trouble due to styling. I think it's generic enough for a lot of people to like.

 

[Engineer]

With all of the anticipation of the US elections and the idea that the GOP is going to take over, do you guys think the latest mini-rally is a buy the rumor, sell the news type of event???!???

 

[Demo24]

With all of the anticipation of the US elections and the idea that the GOP is going to take over, do you guys think the latest mini-rally is a buy the rumor, sell the news type of event???!???

I'm hoping so.


LVS is treating me pretty well at the moment. 50-60 by end of the year, not out of the question.

 

[Engineer]

I'm hoping so.


LVS is treating me pretty well at the moment. 50-60 by end of the year, not out of the question.

Why would you be hoping so unless you are looking to buy something at a cheaper price or you are looking to short now and ask questions later?

I'm thinking about moving some of my stuff out of stocks into cash or bonds for the short term but I'm not sure if it's the right thing now or not. Just don't get a good feeling about the "current" direction of the market. Maybe it's just gas.

 

[Demo24]

Why would you be hoping so unless you are looking to buy something at a cheaper price or you are looking to short now and ask questions later?

I'm thinking about moving some of my stuff out of stocks into cash or bonds for the short term but I'm not sure if it's the right thing now or not. Just don't get a good feeling about the "current" direction of the market. Maybe it's just gas.

Because I would like to see some stocks pull back. I'm not holding stocks, I'm flipping them and I'd like to see some downside before more upside.

 

[dullard]

With all of the anticipation of the US elections and the idea that the GOP is going to take over, do you guys think the latest mini-rally is a buy the rumor, sell the news type of event???!???

I think everyone has realized that this next congress (whether barely democratic or barely republican) will be a do-nothing congress. If democrats maintain control, with the definite republican gains it'll be even harder to get bills passed with the fillibuster. If republicans eak out a slim majority, they won't get anything past the president. No one will have the votes to do anything that isn't bipartisan. And bipartisan votes are rare.

So, with that in mind, I don't think today's election will have any real long term impact. That impact (the benefits of a do-nothing government which leads to stable laws which is great for business planning) has been priced in already. Hence the gains we have had over the last two months.

Sure there will likely be a 3%-5% sizable short-term move (either up or down). But I'm betting (with my stock market investments) that in 2 months we'll be pretty close to where we are now.

 

[Engineer]

I think everyone has realized that this next congress (whether barely democratic or barely republican) will be a do-nothing congress. If democrats maintain control, with the definite republican gains it'll be even harder to get bills passed with the fillibuster. If republicans eak out a slim majority, they won't get anything past the president. No one will have the votes to do anything that isn't bipartisan. And bipartisan votes are rare.

So, with that in mind, I don't think today's election will have any real long term impact. That impact (the benefits of a do-nothing government which leads to stable laws which is great for business planning) has been priced in already. Hence the gains we have had over the last two months.

Sure there will likely be a 3%-5% sizable short-term move (either up or down). But I'm betting (with my stock market investments) that in 2 months we'll be pretty close to where we are now.

Any worries that the economy will actually go down as stimulus money is stopped (gridlock) or unemployment money pulled (again, gridlock) causing a downturn? I know people are complaining about the government spending but right now, it's borrowing and spending. Stop that money cold turkey (which could happen) could be quite a shock to the economic picture as a trillion or more dollars are not going into the economy?

By the way, if the Bush capital gains tax rates are not extended, two months from now might be pretty ugly as many high dollar investors cash in now to take advantage of the lower current capital gains rates.

 

[snoopdoug1]

Nice call on LVS earlier this year - that thing has exploded.

 

[dullard]

Any worries that the economy will actually go down as stimulus money is stopped (gridlock) or unemployment money pulled (again, gridlock) causing a downturn? I know people are complaining about the government spending but right now, it's borrowing and spending. Stop that money cold turkey (which could happen) could be quite a shock to the economic picture as a trillion or more dollars are not going into the economy?

By the way, if the Bush capital gains tax rates are not extended, two months from now might be pretty ugly as many high dollar investors cash in now to take advantage of the lower current capital gains rates.

I risk moving into P&N territory with my response. Sorry if I start a battle here.

The stimulus package is only $400B per year. A big chunk of that ($150B each year) was tax cuts. So, the stimulus spending was actually only $250B per year. The GDP is running right at $13.2T per year. So, the actual stimulus spending is 1.9% of GDP. Since the stimulus bill was passed, GDP has risen by 2.8%. Basically, the stimulus package was the difference between a meagerly growing economy and even more meagerly growing economy. The stimulus spending was just far too small to have a significant impact and the tax cuts didn't stimulate consumer spending.

When the stimulus bill ends, the reverse will be true. We'll go from a meagerly growing to slightly more meagerly growing (if there are no other issues that pop up). It isn't like it'll throw us back into recession or depression.

As for the capital gains tax rates, there are two issues. (1) I think both republicans and democrats will find a bipartisan way to extend them in this TEA party political climate. (2) What gains? The stock market has been flat for a year, so short-term buyers have little to be taxed. The stock market is down over 3 years and 5 years, so medium-term people have little to be taxed. The stock market is flat for 10 years, so those long-term people have little to be taxed. The only real gains are the few investments that occured about 1.5 years ago.

 

[Engineer]

I risk moving into P&N territory with my response. Sorry if I start a battle here.

The stimulus package is only $400B per year. A big chunk of that ($150B each year) was tax cuts. So, the stimulus spending was actually only $250B per year. The GDP is running right at $13.2T per year. So, the actual stimulus spending is 1.9% of GDP. Since the stimulus bill was passed, GDP has risen by 2.8%. Basically, the stimulus package was the difference between a meagerly growing economy and even more meagerly growing economy. The stimulus spending was just far too small to have a significant impact and the tax cuts didn't stimulate consumer spending.

When the stimulus bill ends, the reverse will be true. We'll go from a meagerly growing to slightly more meagerly growing (if there are no other issues that pop up). It isn't like it'll throw us back into recession or depression.

As for the capital gains tax rates, there are two issues. (1) I think both republicans and democrats will find a bipartisan way to extend them. (2) What gains? The stock market has been flat for a year, so recent buyers have nothing to be taxed. The stock market is down over 3 years and 5 years, so those people have nothing to be taxed. The stock market is flat for 10 years, so those people have nothing to be taxed. The only real gains are the small investments that occured about 1.5 years ago.

Very good points Mr. (you've earned that) dullard, as usual! :thumbsup:

(not political at all - pretty straight to the point).

 

[dullard]

Very good points Mr. (you've earned that) dullard, as usual! :thumbsup:

Thanks. But as usual, I can be wrong on predictions.

I just thought of another way to present it. The average salary is roughly $40k. Add in 30% for overhead and you get $52k per person per year. Of the $250B for stimulus spending per year, that translates into 400,000 jobs, or 0.3% of the workforce.

The political part comes from two issues. (1) of that $250B, a lot was taxed, so it cost the government far less than $250B. And (2) those 0.3% of people spend money which may have a trickle down effect as that spent money could create more jobs and more taxes. It is quite difficult to discuss either of these without getting into political battles.

 

[IHateMyJob2004]

Why oh why di I not buy LEE yesterday? Up 12.5% today. Oh well. I will double up when it gets near $1.50 if it actually gets there. I think I may have missed the boat though.

 

[IHateMyJob2004]

I think everyone has realized that this next congress (whether barely democratic or barely republican) will be a do-nothing congress. If democrats maintain control, with the definite republican gains it'll be even harder to get bills passed with the fillibuster. If republicans eak out a slim majority, they won't get anything past the president. No one will have the votes to do anything that isn't bipartisan. And bipartisan votes are rare.

So, with that in mind, I don't think today's election will have any real long term impact. That impact (the benefits of a do-nothing government which leads to stable laws which is great for business planning) has been priced in already. Hence the gains we have had over the last two months.

Sure there will likely be a 3%-5% sizable short-term move (either up or down). But I'm betting (with my stock market investments) that in 2 months we'll be pretty close to where we are now.

So long as Republicans don't get enough power to totall F things up, the economy should do quite nicely over the next 2 years. I say this because whenever I hear a republican speak about the economy, I get frightened by their lack of knowledge. I doubt most of htem even know what keynesianism is based on what some have said they want to do for changes. A stalemate should be good enough. I'll leave it at that. I don't want to P&N a good thread.

 

[IHateMyJob2004]

Care to elaborate on the "culture" part? The only thing I've noticed is they have a culture of being "serial acquirers", however every single business they've acquired besides MBNA, Countrywide, and Merrill has turned out to be excellent.
Sure they did absolutely stupid things such as not allowing Countrywide to go bankrupt so they will be able to buy it's assets on the cheap which would also have removed liability that they are experiencing now...The same with Merrill. If Ken Lewis waited a few more days or a week, he could have had Merrill almost for free. The notion that they were able to conduct "due diligence" in probing Merrill's books within 24 hours is funny.

After watching this several times though, I don't put all the blame on Ken Lewis.
http://www.pbs.org/wgbh/pages/frontline/breakingthebank/

Ken Lewis got greedy. I put a big part of the blame on him. Compare hwo things are run at BAC to WFC. WFC had limited exposure to risk because they did not undersstand the financial devices that other banks got tangled up with including BAC. So WFC stayed away for the most part. The culture at WFC is one of not being greedy. At BAC though, I just don't see it.

And I should be blunt. It does not take me long to write a comapny off as a less than stellar comapny. So it wouldn't take much more than Ken Lewis to keep me away. Till BAC proves that things have really changed, I don't think they have as that will take time.

I would go 100% into WFC for hte right price though!

Also on my sh!t list due to CEO greed is Oracle. I went to JavaOne and got to see that guy in action. He treats Oracle as his own little piggybank to support his hobby (Worl Cup sailing). I could not beleive how arrogant that guy was over the World Cup champion sailing team that Oracle sponsors. That is all it took for me to decide never to even consider Oracle as an investment.

 

[thepd7]

I'm smiling at my F that I bought back at $2.60/share.

$5.40 here. My target is $20.



Anyone have opinions on WFR? I'm in @ $10.85 and $10.10 and might get in for more. I think it's a $16 stock. Citi upgraded them to a buy with a target of $18 but the market ignored it because they missed estimates by 3 cents/share (ignoring that they lost money Q3 last year).