I finally sold EFUT at $17.24 today. I'm a bit disappointing about the pos, not just due to the massive 35% loss, it's also the fact that I did not spot the market was going to retreat by a lot. But since I was getting in EFUT at the wrong time by using daily graph, if I changed to use weekly graph at least my loss should much smaller. Anyway, this pos originally was more like a pure technical bet than quantitative analysis, I accepted the loss and learn from it.
Surprisingly in such a down day my SVA moved up instead of down, it showed some strength to hold above the 20-day EMA. Now using both daily and weekly graphs, it showed 20-period > 50-period > 100-period > 200-period. Looking backward further enough, $7 is more or less the most critical level as it's the historical high (base on closing price, not intraday).
Market is losing steam in here, even strong stocks like GOOG, BIDU, AAPL and RIMM drop like crazy in a day. Yes they rebounced a bit but if CSCO said they see slow down due to lower spending from the financial sectors, then the ripple effect may spread to other tech stocks.
In the meantime I will erase all my previous recommendation on buying into any position, including NTES (with disappointing earnings anyway), FMCN and any others.
It is not the end of the world, but patient is a very important ingredient, I don't want to make mistake like EFUT again. When I think market starts to consolidate and calm down, I'll look to buy into higher respect name like the 4 mention above. As well, Chinese stocks I believe can still go from here as the Chinese economy may slow down but still grow. When things are settled I'll try to pick the leaders in the sectors, not just any Chinese stock.
Thursday, November 8, 2007
Tuesday, November 6, 2007
SVA
So many news these days. Is market heading up or down??? Are people too crazy about chinese stocks??? How bad can financial stocks go??? So many questions being unanswered.
Anyway, PTR suddenly becomes the biggest firm on earth with about $1 trillion market cap. Holy cow that's a lot. I guess I have to admit that it goes up a bit too much for now, hey I don't mean it should fall by a lot, it may just hang in there for a while to let the earnings catch up the market value.
On the other hand, Alibaba.com went public in HK and boosted 169% in IPO. People probably are thinking about tom.com in tech bubble's time.
If you really just think these are again purely tech bubble hypes you probably are not perfectly right. Ask anyone on the street to see if she has a computer at home and ask the same question about 10 years ago, you'll see how computer/internet changed our basic living style.
Anyway, I initiated a position in SVA, a Chinese biotech firm, which is pretty small. It's 20-week EMA is around $4.50 and I got in at $6.07, a bit high but again I mean to hold it for longer, unless it went up too fast like BIDU did.
BIDU shot up as high as $430 before it retreated, I should have sold it this morning instead of yesterday, well but I guess I profited from it so shouldn't complained.
I feel bad about CTRP as if I have hold onto it I'm now making 20%..... If I have use the weekly graph to guide my trade probably I'll hold onto it (or may not). Can't believe similar things happened to CEDC as well.... I'm such a loser.....
Anyway, PTR suddenly becomes the biggest firm on earth with about $1 trillion market cap. Holy cow that's a lot. I guess I have to admit that it goes up a bit too much for now, hey I don't mean it should fall by a lot, it may just hang in there for a while to let the earnings catch up the market value.
On the other hand, Alibaba.com went public in HK and boosted 169% in IPO. People probably are thinking about tom.com in tech bubble's time.
If you really just think these are again purely tech bubble hypes you probably are not perfectly right. Ask anyone on the street to see if she has a computer at home and ask the same question about 10 years ago, you'll see how computer/internet changed our basic living style.
Anyway, I initiated a position in SVA, a Chinese biotech firm, which is pretty small. It's 20-week EMA is around $4.50 and I got in at $6.07, a bit high but again I mean to hold it for longer, unless it went up too fast like BIDU did.
BIDU shot up as high as $430 before it retreated, I should have sold it this morning instead of yesterday, well but I guess I profited from it so shouldn't complained.
I feel bad about CTRP as if I have hold onto it I'm now making 20%..... If I have use the weekly graph to guide my trade probably I'll hold onto it (or may not). Can't believe similar things happened to CEDC as well.... I'm such a loser.....
Monday, November 5, 2007
BIDU
BIDU made new high in a volatile day. I sold at the open as I'm not sure how credit crunch news will affect the market, so I sold at $403 and locked my profit. As I said, I'll consider buying it back if it retreats some, but that may not happen, we will see.
Still looking for chances to buying into NTES or FMCN, I would prefer FMCN more than NTES though.
LOCM reported earnings after closing today, price dropped after hour. Let's see how it goes tomorrow.
Remember I said the columnist who wrote on Sunday shorting BIDU since $180? No surprise that he is still holding the position. Read a bit in his column and you will find that he likes to refer general investing public as "stupid people". As well, he likes to refer the market as "sustained by stupid people, just how long it can sustain".
There are always people that will never admit they are wrong (on timing) and try to hide their mistake by saying others are stupid. I'm pretty sure BIDU will go up and down along the way. But if BIDU did not go down when you think it should and went up by 140% more, it's pretty obvious that your original decision is wrong. Okay, anyway, I'm tired of talking about this "smartest person".......
Still looking for chances to buying into NTES or FMCN, I would prefer FMCN more than NTES though.
LOCM reported earnings after closing today, price dropped after hour. Let's see how it goes tomorrow.
Remember I said the columnist who wrote on Sunday shorting BIDU since $180? No surprise that he is still holding the position. Read a bit in his column and you will find that he likes to refer general investing public as "stupid people". As well, he likes to refer the market as "sustained by stupid people, just how long it can sustain".
There are always people that will never admit they are wrong (on timing) and try to hide their mistake by saying others are stupid. I'm pretty sure BIDU will go up and down along the way. But if BIDU did not go down when you think it should and went up by 140% more, it's pretty obvious that your original decision is wrong. Okay, anyway, I'm tired of talking about this "smartest person".......
Sunday, November 4, 2007
LOCM
Quick update on my holdings.
I sold LOCM on Friday at $5.24. The stock price broke below the all weekly EMA I use. As well, if I changed to use weekly EMA than daily EMA, the 20-week EMA actually failed to break above the 100-week EMA (there is no 200-week EMA for now). So if I used the weekly EMA to enter the signal, I shouldn't enter into the position at all. I took the 25% loss and move on.
BIDU broke through $400 and closed at $409 on Friday. It went up faster than I thought, I wonder should I take profit. If I take the profit it's primarily due to the speed of its move in such a short term, as well as I have capital loss to use to offset my 18% gain on BIDU. Market will still put more focus on subprime ripple-effect on all financials these days, at the end it may affect the sentiment on BIDU. I guess I would like to take the profit by this week as I anticipate BIDU to retreat and it may retreat to as much as low-$300. I will then buy it back.
Remember I mentioned that on a newspaper a columnist paper-traded and sold short BIDU at $180. This guy is still holding his short position..... sitting on a loss of 127%. I don't know what this guy is thinking. Anyhow, this guy hasn't updated his reason for holding the position. How ridiculous.
I sold LOCM on Friday at $5.24. The stock price broke below the all weekly EMA I use. As well, if I changed to use weekly EMA than daily EMA, the 20-week EMA actually failed to break above the 100-week EMA (there is no 200-week EMA for now). So if I used the weekly EMA to enter the signal, I shouldn't enter into the position at all. I took the 25% loss and move on.
BIDU broke through $400 and closed at $409 on Friday. It went up faster than I thought, I wonder should I take profit. If I take the profit it's primarily due to the speed of its move in such a short term, as well as I have capital loss to use to offset my 18% gain on BIDU. Market will still put more focus on subprime ripple-effect on all financials these days, at the end it may affect the sentiment on BIDU. I guess I would like to take the profit by this week as I anticipate BIDU to retreat and it may retreat to as much as low-$300. I will then buy it back.
Remember I mentioned that on a newspaper a columnist paper-traded and sold short BIDU at $180. This guy is still holding his short position..... sitting on a loss of 127%. I don't know what this guy is thinking. Anyhow, this guy hasn't updated his reason for holding the position. How ridiculous.
Stocks today act like tech bubble in Y2K? Part 3
How can we not talk about China when we talk about asset bubble today?
I haven't really defined what I mean by bubble here, it's now part 3, let me define what I mean by bubble before I continue. You may see my definition is totally different than what other people may define it.
My definition of asset bubble means the asset price is "X" standard deviations above the most optimistic expectations. For the value of X, it is more complicated as it depends on quite a few variables. I'm not going to discuss X in here for now, I will leave that later. In the meantime, just accept my definition and assign a value to X yourself which you think it's insane.
PTR is definitely on the hot spot these days because its market value is now only stayed behind Exxom as the second largest company on earth. So I'll use PTR as the talking point here.
Although it's just behind XOM, but I'm not using XOM here. In fact, I'm using CVX and BP, as their net incomes came close to PTR, serve as a better comparison (Their net incomes are all about $19 billion).
I checked from yahoo finance, both BP and CVX quarterly revenue growth (yoy) are about 4.0%, while PTR is 20.3%, five times higher. Operating margin of BP is merely 9%, CVX is 14% and PTR is 25.6%. Ok, tell me if I'm wrong. That means if their revenue growth continue for a few more years as last year, for each year BP and CVX make $1 revenue, PTR can make more than $1. As well, every $1 more of revenue to BP and CVX, only $0.09 and $0.14 go to net income, while PTR will make $0.256 as net income out of $1 revenue. You also compound the $0.256 to 5 times higher revenue growth, the difference becomes even larger.
Let's now look at the P/E and PEG, PTR's P/E (about 24) is double that of BP or CVX, while PTR's PEG is slightly higher than CVX (1.67 vs 1.42) but lower than BP (2.53). So even PTR is overvalued, it's not crazily overvalued as compare to CVX, it's probably not even overvalued compare to BP.
PTR's current dividend yield is among the lowest, 2.2% for now, while BP is 3.4% and CVX is 2.6%. But wait, let me pull back XOM in here, XOM's current dividend yield is only 1.6%, lower than PTR.
Finally, I want to pull in Mr. Warren Buffett as well. He sold all his stake in PTR and made probably $250 million of profit. But hold on, isn't Mr. Buffett's phliosophy is to buy and hold forever? Why would he sell PTR after holding for about 4 years? I guess other than whatever political reason/conspiracy, I can only guess that it's because he thinks PTR is an asset bubble.
Now you see my definition comes into play. If asset bubble means X standard deviation above the most optimistic expectation, and if my comparison above is at least reasonable, PTR could be overvalued but doesn't look like crazily overvalued. In this case I guess I can only say that Mr. Buffett has a very low X in his formula, if not negative.
So, is China forming an asset bubble? Let me move my discussion to Hong Kong market. HK's currency is linked to US dollar. While US dollar continues to depreciate, HK dollar cannot stay up due to the link. Therefore, it's very hard for HK market to raise interest rate unless they want to remove the link. Therefore, HK has (or at least approaches) to negative real interest. It creates an environment similar to Japanese Yen. Simply, borrow HK dollars cheaply and purchase HK assets, because inflation in HK assets is even higher than the interest you have to pay. And you know HK's currency amount cannot appreciate much in the short term. Yes, it's very similar to the case of Yen carry trade.
So, no wonder HK market up by so much this year because some very smart people know this relationship. My rough guess is, if US dollar does not appreciate, HK market cannot drop by much due to the currency link.
I cannot say if China is a bubble by now, at least use PTR as an example, because I think it doesn't reach the X yet (but should start to be cautious). There are always stocks that are overvalued and undervalued, I cannot conclude the whole market by only one statement.
I haven't really defined what I mean by bubble here, it's now part 3, let me define what I mean by bubble before I continue. You may see my definition is totally different than what other people may define it.
My definition of asset bubble means the asset price is "X" standard deviations above the most optimistic expectations. For the value of X, it is more complicated as it depends on quite a few variables. I'm not going to discuss X in here for now, I will leave that later. In the meantime, just accept my definition and assign a value to X yourself which you think it's insane.
PTR is definitely on the hot spot these days because its market value is now only stayed behind Exxom as the second largest company on earth. So I'll use PTR as the talking point here.
Although it's just behind XOM, but I'm not using XOM here. In fact, I'm using CVX and BP, as their net incomes came close to PTR, serve as a better comparison (Their net incomes are all about $19 billion).
I checked from yahoo finance, both BP and CVX quarterly revenue growth (yoy) are about 4.0%, while PTR is 20.3%, five times higher. Operating margin of BP is merely 9%, CVX is 14% and PTR is 25.6%. Ok, tell me if I'm wrong. That means if their revenue growth continue for a few more years as last year, for each year BP and CVX make $1 revenue, PTR can make more than $1. As well, every $1 more of revenue to BP and CVX, only $0.09 and $0.14 go to net income, while PTR will make $0.256 as net income out of $1 revenue. You also compound the $0.256 to 5 times higher revenue growth, the difference becomes even larger.
Let's now look at the P/E and PEG, PTR's P/E (about 24) is double that of BP or CVX, while PTR's PEG is slightly higher than CVX (1.67 vs 1.42) but lower than BP (2.53). So even PTR is overvalued, it's not crazily overvalued as compare to CVX, it's probably not even overvalued compare to BP.
PTR's current dividend yield is among the lowest, 2.2% for now, while BP is 3.4% and CVX is 2.6%. But wait, let me pull back XOM in here, XOM's current dividend yield is only 1.6%, lower than PTR.
Finally, I want to pull in Mr. Warren Buffett as well. He sold all his stake in PTR and made probably $250 million of profit. But hold on, isn't Mr. Buffett's phliosophy is to buy and hold forever? Why would he sell PTR after holding for about 4 years? I guess other than whatever political reason/conspiracy, I can only guess that it's because he thinks PTR is an asset bubble.
Now you see my definition comes into play. If asset bubble means X standard deviation above the most optimistic expectation, and if my comparison above is at least reasonable, PTR could be overvalued but doesn't look like crazily overvalued. In this case I guess I can only say that Mr. Buffett has a very low X in his formula, if not negative.
So, is China forming an asset bubble? Let me move my discussion to Hong Kong market. HK's currency is linked to US dollar. While US dollar continues to depreciate, HK dollar cannot stay up due to the link. Therefore, it's very hard for HK market to raise interest rate unless they want to remove the link. Therefore, HK has (or at least approaches) to negative real interest. It creates an environment similar to Japanese Yen. Simply, borrow HK dollars cheaply and purchase HK assets, because inflation in HK assets is even higher than the interest you have to pay. And you know HK's currency amount cannot appreciate much in the short term. Yes, it's very similar to the case of Yen carry trade.
So, no wonder HK market up by so much this year because some very smart people know this relationship. My rough guess is, if US dollar does not appreciate, HK market cannot drop by much due to the currency link.
I cannot say if China is a bubble by now, at least use PTR as an example, because I think it doesn't reach the X yet (but should start to be cautious). There are always stocks that are overvalued and undervalued, I cannot conclude the whole market by only one statement.
Thursday, November 1, 2007
Stocks today act like tech bubble in Y2K? Part 2
These days the most popular tech name in Canada I believe is Research In Motion. So I'll check RIMM to see if it deserves to be a bubble at today's price.
RIMM has experienced some negative earnings along the way, so I'll use the gross profit for now for simplicity.
Annual gross profit ending Feb 1999 was $18.6 million, while gross profit ending Feb 2007 is $1.66 billion. Well, it's 89 times. Okay, what about I use net income as measure, not to care that at some point in time net income decreased then going back up. Anyway, I'll show you what I mean.
Annual net income ending Feb 1999 was $6.4 million. Guess what, net income ending Feb 2007 is $631.6 million. 98.7 times, my friend.
RIMM's stock price (in $US) was $1.47 by end of Feb 1999 and $46.87 by end of Feb 2007 (adjusted for all stock splits). So, that is an increased of about 32 times. Hey, even lower than the increase of net income.
With RIMM trading at $122 today, that came to an increase of 83 times from $1.47. So, can I say RIMM is overvalued??? If $1.47 made sense by that time, shouldn't RIMM have gone up by 99 times to $145 by Feb 2007 already???
Okay, maybe I missed something. Earnings per share by Feb 1999 is $0.10. So with an unadjusted price of $8.88, RIMM's P/E back then was 89, quite high. Let's say we think a P/E of 30 should make more sense back then (30 is actually pretty low for a small growth stock), it will make the starting price became $0.50 instead of $1.47. So if we believe $0.50 was more fair by that time, given that net income increased 99 times, as at Feb 2007 RIMM should trade at $49.50. So, the actual price of $46.87 by end of Feb 2007 was not bad.
Now, with RIMM sitting at $122 per share, a bit more than double from Feb 2007. To me, it means if RIMM can show a net income increase by double then I think the price make perfect sense. Anything less than a double is more like a miss to me. Since $46.87 at Feb 2007 makes sense, so at least I will say RIMM was not a tech bubble by that time.
RIMM has experienced some negative earnings along the way, so I'll use the gross profit for now for simplicity.
Annual gross profit ending Feb 1999 was $18.6 million, while gross profit ending Feb 2007 is $1.66 billion. Well, it's 89 times. Okay, what about I use net income as measure, not to care that at some point in time net income decreased then going back up. Anyway, I'll show you what I mean.
Annual net income ending Feb 1999 was $6.4 million. Guess what, net income ending Feb 2007 is $631.6 million. 98.7 times, my friend.
RIMM's stock price (in $US) was $1.47 by end of Feb 1999 and $46.87 by end of Feb 2007 (adjusted for all stock splits). So, that is an increased of about 32 times. Hey, even lower than the increase of net income.
With RIMM trading at $122 today, that came to an increase of 83 times from $1.47. So, can I say RIMM is overvalued??? If $1.47 made sense by that time, shouldn't RIMM have gone up by 99 times to $145 by Feb 2007 already???
Okay, maybe I missed something. Earnings per share by Feb 1999 is $0.10. So with an unadjusted price of $8.88, RIMM's P/E back then was 89, quite high. Let's say we think a P/E of 30 should make more sense back then (30 is actually pretty low for a small growth stock), it will make the starting price became $0.50 instead of $1.47. So if we believe $0.50 was more fair by that time, given that net income increased 99 times, as at Feb 2007 RIMM should trade at $49.50. So, the actual price of $46.87 by end of Feb 2007 was not bad.
Now, with RIMM sitting at $122 per share, a bit more than double from Feb 2007. To me, it means if RIMM can show a net income increase by double then I think the price make perfect sense. Anything less than a double is more like a miss to me. Since $46.87 at Feb 2007 makes sense, so at least I will say RIMM was not a tech bubble by that time.
Stocks today act like tech bubble in Y2K? Part 1
Many articles and news have compared today's market to the tech bubble in about 8 years ago. Well no two markets are exactly the same, they may look alike, but I think it's too easy to come up with such conclusion that they are alike. Let me compare something between today and 8 years ago.
Google did not go public yet in 2000, its net income is roughly $3.5 billion per year in 2007. This kind of net income is like Microsoft in 1997.
In 1997, Microsoft traded between a P/E of 31 to 57. As at end of today, with Google sitting at $703 per share, it's P/E is about 55. Highest price of Microsoft in 1997 was $37.75. You know the peak of tech bubble was in 2000, where Microsoft reached $120 before it came back down (Microsoft splitted 2 to 1 once since then, so the highest now should be $60.). So Google sitting at P/E of 55 is still in Microsoft 1997's range.
Microsoft's net income grew from about $3.44 billion in 1997 to $9.42 billion in 2000, a 2.74 times. Its stock went up from highest to highest 3.2 times. I guess if I say if Google can grow its net income in this speed and its price should go up by 3 times to $2,100 per share ($6,000 billion in market value) sounds crazy to many people, but unless you see that kind of price movement in 3 years a new tech bubble may not be true.
Let's look at this issue in another way. We fast forward from 1997 to today. Microsoft reported annual earnings of $14.1 billion ending June 30, 2007, it's now at $346.7 billion in market value. I know everyone agrees Google can grow faster than Microsoft like China can grow faster than U.S., but still you need time to pick up the difference, which is a 4 times difference in net income.
So if Microsoft producing $14.1 billion net income and is (only) worth $346.7 billion in market value. While Google has (only) $3.5 billion net income and is now worth $219.5 billion in market value. I think people are betting on Google can make up the difference very fast, otherwise, the price of Google seems too high. But unfortunately I don't know if it's too high to worth shorting Google.
Anyway, judging an existing of tech bubble only by comparing Google and Microsoft is not fair.
Google did not go public yet in 2000, its net income is roughly $3.5 billion per year in 2007. This kind of net income is like Microsoft in 1997.
In 1997, Microsoft traded between a P/E of 31 to 57. As at end of today, with Google sitting at $703 per share, it's P/E is about 55. Highest price of Microsoft in 1997 was $37.75. You know the peak of tech bubble was in 2000, where Microsoft reached $120 before it came back down (Microsoft splitted 2 to 1 once since then, so the highest now should be $60.). So Google sitting at P/E of 55 is still in Microsoft 1997's range.
Microsoft's net income grew from about $3.44 billion in 1997 to $9.42 billion in 2000, a 2.74 times. Its stock went up from highest to highest 3.2 times. I guess if I say if Google can grow its net income in this speed and its price should go up by 3 times to $2,100 per share ($6,000 billion in market value) sounds crazy to many people, but unless you see that kind of price movement in 3 years a new tech bubble may not be true.
Let's look at this issue in another way. We fast forward from 1997 to today. Microsoft reported annual earnings of $14.1 billion ending June 30, 2007, it's now at $346.7 billion in market value. I know everyone agrees Google can grow faster than Microsoft like China can grow faster than U.S., but still you need time to pick up the difference, which is a 4 times difference in net income.
So if Microsoft producing $14.1 billion net income and is (only) worth $346.7 billion in market value. While Google has (only) $3.5 billion net income and is now worth $219.5 billion in market value. I think people are betting on Google can make up the difference very fast, otherwise, the price of Google seems too high. But unfortunately I don't know if it's too high to worth shorting Google.
Anyway, judging an existing of tech bubble only by comparing Google and Microsoft is not fair.
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