Where Do You Have Your Money?
It dawned on me yesterday while writing my post that we do a lot of speculation on this site...but I am not sure how many of us really speculate.
Needless to say if you are working on a desk at a prop shop or at a trading arm of a bulge bracket, you have money in play almost every single day.
But how many of you guys are actually putting your own nut on the line? It's tougher now than ever before and I'm curious to see who the risk takers are.
I have to be honest and say that I haven't had significant dollars in play since Ford and GE were the safest bet since Jordan in the playoffs.
I just haven't had the patience for the lack of volume and I honestly don't know enough about emerging markets in the East. Commodity futures can be great and I certainly regret not being in on silver the past year, but I'm kind of bored of it to be honest. My style has always been conducive to volume and volatility and lately I am just plain disinterested. Who's with me?
It fascinates me how much individual equities (especially U.S. based) have exited the day-to-day conversations on this site. I can't recall the last time I read anyone post about a stock they firmly and utterly believed in. It's no different outside of our friendly jungle confines. None of my friends talk about individual equities any more, very few about bonds, etc...
Seems all of our conversations as of late focus on Emerging Markets and the (swelling) Commodity Bubble.
Well, today I'm throwing out a challenge to get the creative analytical juices flowing.
5 SBs to the best strategic argument for an investment play other than commodities or emerging markets. It can be an individual stock, an industry or a strategy. The only caveat I will put up is that it is a play where your own money is either already at stake or will be in the near future...
Let's hear it monkeys, where would you put your money today?
and more importantly...
Is your mouth ready to put itself where your money is?
Business development companies. They give you levered exposure to middle-market credit and a strong dividend. Many dividend yields over 8.0%, so they pay like a HY bond fund. Combined, you get a levered long-credit play and current income. There are some legitimate criticisms of BDCs (analyzing financials is difficult because of their book of MM loans, the famous Allied Capital fraud case, the Ponzi nature of the equity raises), but I think the cycle is right for the trade.
Below is something I wrote up for my blog on August 25th, 2010. It's a deep value play in which I hold a position. My cost basis is $3.30, the stock is currently trading at $4.38, and has traded as high as $5.00 in January. Enjoy!
As of today (August 25th, 2010) HQS is trading at levels last seen around 1997-98. Before I delve deeper into some of the potential reasons behind this, I’d like to take a step back and process this rationally. What kind of numbers (Revenue, EPS, Margins) were being reported by HQS in 1998?
•Revenue FY 1998: $2.56 mm •EPS: $0.04 •Gross Margin: 32% Let’s compare the numbers from 1998 to the most recent FY:
•Revenue FY 2009: $72.9mm •EPS: $0.60 •Gross Margin: 42% By looking exclusively at the above numbers and not having any further knowledge about the business, this seems to be a steal. This brings me to the various reasons provided as to why the stock may be trading at such depressed prices. First, there is plenty of negativity towards Norbert Sporns, the CEO at HQS and his arguably poor decisions of the past (Sporns has a tendency to raise money in a dilutive fashion, avoiding other less costly means of financing with the most recent being an $11mm equity raise in August 2010). Second, is the voting power of the common shareholders, none. The preferred effectively hold all of the voting power and management happens to hold the preferred. Finally, the revenue composition consists of sales recognized before the cash has actually been received. HQS has a large amount of A/R that seems to be only modestly improving.
HQS is not for the faint of heart, as there are many fishy (pun intended) reasons to stay away, but perhaps these various reasons provide a great deep value investment. Paraphrasing Ben Graham, he denounces the risk of a security to be tied to volatility, as all securities move up and down in price depending on the situation Mr. Market provides. It is up to the investor to buy or sell the security at the various prices the market presents. A value investor is not tied down to price and not a slave to time, as all returns are approached as absolute and not relative. A value investor spends his time on looking at the current condition and value of a security relative to the price being provided by the often irratic market.
Final note: After the August $11mm equity raise at 3.61 a share, the stock still trades at a discount to its intrinsic value using the NCAV method mentioned in my earlier posts. I genuinely believe that all of the reasons given above are debatable and can be countered. At todays price of $2.70 a investments pose some sort of uncertainty and risk. By no means is this post sufficient enough to make a buy or sell decision. I hope this has sparked some interest to dig deeper on your own!
Half of my net worth is tied in a sort of fund I set up with a friend, it trades options but I am not comfortable disclosing the strategy.
I bought into CWRN a few days back (it's a penny stock - so purely speculative) with a relatively tiny portion of my overall funds. It's a mining company that actually found iron ore and is now in the process of shipping it to buyers in China. Iron ore prices are rising and the company has projected ~30M in revenues/quarter. The only reason I bought this really was because I have a buddy that lives near the mining operations and he verified that they are actually mining iron ore.
find out what is in 50 cent's portfolio and wait until his next twitter post.
Well done.
majority of investments I handle are in equities. I buy and sell the same day. I'll admit, i've been doing this for only about 2 years and do not know what volume was like pre crisis, but from what ive seen, your average S&P 500 stock goes up or down 2-4% per day and gets more extreme on wild days which are about 8 - 10 trading days in a month.
I can understand why people say prop trading is dead (people who manage 10s of millions), but for someone putting in $300k or less per day, there is no excuse not to make a killing if you have a good strategy. Getting 0.5% gain per day is 100%+ ROI per year
I wrote on another post about OREX, bought it this Tuesday at 2.57 for my own portfolio and 2.52 for a friend's/client's portfolio (didn't process my own funds in time to get a better price), it closed at 3.61 Friday, and went up to 3.77 after hours. Before this one I got BCON on Jan 10th at 22 cents, and it is at 30 cents now. And before then I got FBP at 24 cents and sold it at 36 cents less than a month later (fbp had a 15 for 1 reverse split, if you are going to take a look). For friend's/client's portfolio (but not my own), got the a lot less impressive INSV at 35 cents (also jan 10) and sold at 42 cents Feb 1st. Also bought PRPH at 1.17 end of december and sold at 1.50 this Tuesday.
The bulk of my retirement funds are currently in Treasuries, and have been for over a year now. The rest of that portfolio is in blue chips.
As for my active investments, the vast majority is in angel financing and I recently began moving into peer-to-peer lending via Lending Club. I'm early into it, but I'm earning over 11% (annually) so far, and I've even had one loan paid in full (which kinda surprised me because the borrower had only made one payment at that point).
really, mostly in treasuries for a retirement account? I really don't like treasuries here. think there are way safer yield plays out there.
also guys, keep in mind depending on what desk you wind up on you may be limited in what you can invest in.
Safer yields than treasuries? Assuming these are USA treasuries, what safer yield would you be after?
Callaway Golf (ELY) The metrics for this stock are terrible, EV/EBITDA is 98 while its peers are at..... 5 But I bought this stock because India and China are estimated to become 1 billion dollar golf markets each in the next 5 years. and india and china are gonna take over the world by 2030 (see BRIC and the N11 countries)
A more reasonable stock if you don't like looking at stocks with shitty metrics... Caribou Coffee (CBOU) Trading at a discount compared to its peers. 8x EV/EBITDA while peers are at 10-12X. Caveat- It includes more mature companies and vastly different geographic presences. They have a big midwest presence are planning on expanding into the west and increasing there east coast presence. This past year they tested ovens at 150 of their stores and received an overwhelmingly positive response and have now decided to put ovens in all of their stores (a completely new revenue stream). Also- a recent taste test study showed that CBOU coffee was superior to Starbucks.
and TBT (Ultrashort treasuries) for obvious reasons...
ELY is a good company. The reason that ROE is so shitty is that all the R&D-money spent yield great product, but the market has been really bad... All of the golf companies don't make a lot of money these days.
My overall portfolio breakdown
Bought SPY at 84.04 on the way down (pre bounce to 88, 89 levels) before we sold off into the high 60s, that was scary but i feel better having done that than where I was at the same time trying to cherry pick the GE/MO/PYN (NYC muni)/ and others when they were beat to shit. Also bought a shitload more SPY from my winnings in the flash crash at 104.64 as we retraced back down after greece and going to keep them in at least for the whole year gain for long term caps.
Kenny Powers-- moving some of my money into BDCs soon.. do you have UBS as well?
In terms of what I hold now other than the 104.64 SPY buy, I have:
-A basket of preferred stock, financial and RE heavy, that were bought at distressed levels -Global Bond Fund - Commodity Unit Trusts (investments in the commodity producing equities) - Emerging Markets fund from Lazard - Actively managed global balance funds from Wells Fargo, Lazard, Ivy Asset Management -Principal protected structured product that is leveraged short the USD vs commodity producing countries such as Brazil, Norway, New Zealand, Canada(small position, hedge)
(BPC.L) bahamas petroleum...!!! bought on monday, closed on friday... a sweet gain in a week 25%. If you have got the balls - short it on monday and probably tuesday for a 5-10% drop, afterwards buy and hold for a while. just one of my few trades.
My strategy - cant disclose it, but stay away from large caps... ETF's are getting hot.
quote=monkeyDD bahamas petroleum...!!! bought on monday, closed on friday... a sweet gain in a week 25%. If you have got the balls - short it on monday and probably tuesday for a 5-10% drop, afterwards buy and hold for a while. just one of my few trades.
My strategy - cant disclose it, but stay away from large caps... ETF's are getting hot.[/quote]
just wondering if anyone noticed that BPC lost 8% today as i predicted on Saturday... and no it isn't insider trading, I'm just good at what I do.
Hardcore savings... you know, for my boat.
All my scholarship and tuition money for the next 2 semesters are invested in NEOP (NeoProbe). I don't come from a rich family and if this investment flops I will have to take out some loans.
I've made roughly 40% already, and expect another 200% from this stock. It's risky as hell but I believe it will work out. But yes, I do have my money where my mouth is... almost all of it.
....I only trade futures/commodities and options on futures
My money is in Jim Rogers ETN's
and active trading wise....
$1.50-$2.00 Dec '11 Cotton bull call spreads. March '12 $14.00-17.00 Soybean bull spreads and I'm selling front month out the money bean puts and calls to pay for the spreads and generate consistant income.
I've been contemplating Berkshire B shares. I have my money into 2 lots - trading and speculation and "real" money, as I call it. Money which I need to live and it currently sits in a Shittybank Savings Account earning .5%/year. I was going to dump it in something like KO, MCD or VZ - all of which pay a dividend - particularly VZ at 5+%.
It then dawned on me that buying Berkshire is essentially buying a blue chip mutual fund. The big difference is that you don't get the dividend of all the companies. Instead, you get Warren Buffet. I think it's a good tradeoff. The float he is collecting is mind-boggling at this point and some of his investments were scrutinized a bit lately and they've panned out very nicely.
You're better off trading against the Fed then this guy.
I think KO, MCD, VZ or BRK.B.
I have some of these positions and will be initiating into one or all in the next 3 months.
Separately, I'm a huge fan of NZT. New Zealand Telecom.I bought at 6.15 and it's 8.80 and pays 11% dividend as an ADR. Also, LNG, (Cheniere Energy), if they get the approvals they need this stock could be a 3-bagger form it's current $8 price. It's highly volatile though and can swing 15% either way in a day.
I own NZT and LNG.
Lots of good thoughts here guys, keep them coming. This is what I like to see. Going to have to spread those SBs around, too hard to place one answer as the best. Some very nice work, however, monkeys.
Cash.
Our family has invested large sums of money in actively managed mutual funds that invest in emerging markets, especially in China, Korea, and others. Some even surpass 100%, but, on average, most of them range between 50%~70%.
We concluded that there is nothing more to come. Therefore, we will monetize all of our positions next week.
Personally, I believe there will be another crash in the stock market sooner or later. I am not sure whether it will be ignited by an overheated Chinese economy, European debt crisis, bankruptcy declaration of California or other states, food and commodity inflation, or whatsoever, but the world seems to be deeply troubled.
The main cause of today's mess, which I subscribe to greatly, came from macro imbalances that are not sustainable any longer. US consumers, the major engine of the world growth for decades, are broke. The countries that have heavily relied on them, notably China and other emerging markets who are leading the world growth largely today, will also slow down as a result.
Thanks to Bernanke and other central banks who joined the easing parade, 2009 to 2010 was an incredible period for those who have invested in the stock market, although the degree of yields will vary region to region. While activist Fed policies and everything were pretty necessary given the unusual severity of the situation, there should've been structural reforms at the same time. But unfortunately, most of them were piecemeal, temporary, and cyclical approaches, at best; marginal effectiveness of those tools, in my view, are now showing strong signs of wear; well, I have a different view of the rising 10-year Treasury rate, whereas many people beleive it has something to do with the expected recovery in the economy.
Then to me, everything seems pretty obvious. I am less confident of picking winners in a contracting economy. I am also not pretty sure about the exact timeframe for these things to play out, which rules out options or futures as a choice.
Seeking available alternatives, given the above analysis of my own, it came clear to me that only cash reserves the option to buy stocks at a "reasonable" price in the future. Therefore, for me, everything seems to be overvalued.
Mattress. Stuff it with cash.
Chinese?
anything midcap with a ton of growth, shorting big gaps. (no "strategy" there just learn how to read japanese candles)
speculative in commodities (there is a strategy here. very quant heavy)
3X Leveraged ETFs
While I keep most of my serious money in the standard blend of US equities and investment grade corporate bonds, I do tend to "put my money where my mouth is" and invest in the projects / companies my PE firm funds here in China... not "huge" money, but I invested tens of thousands in our last deal... no fees, of course : )
Pokerstars.com Cash out after you're up 30% of your buy-in, per session, and you'd be surprised what you make LT.
Well I can tell you where I would not invest my money. AOL - I just read they are buying the Huffington Post and that Huffington herself will be the editor in chief of all their content?! I about fell out of my seat.....
Here is a quote from HP, ironic.
"Far from changing the Huffington Post's editorial approach, our culture, or our mission, it will be like stepping off a fast-moving train and onto a supersonic jet. We're still traveling toward the same destination, with the same people at the wheel, and with the same goals, but we're now going to get there much, much faster."
Funny because it is true in a sense. The only place HP is going fast is nowhere - if people want biased left-wing views they go to HP, not AOL. I think AOL made a big mistake giving this network control over all their content.
Update: OREX is now 3.96, and day range is 3.80-4.15 :)
I'm short Brazil right now. I expect a consumer credit pull back of a rather large scale.
dont short brazil, your better off shorting china in the short run...
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