New guys, now is not the time

[riskfreetrading]

Good to hear from you. I hope you had a good time at your broker meeting. I also hope they gave a free lunch, otherwise we may suggest better and tempt you.

Sorry to hear that your stock went down. Shorts may help at this point if they decided to cover.

I am impressed you can fall asleep easily and soundly after just knowing that one of your stocks went today. I assume the man's best friend (you dog) was somewhat also helpful with his calm and sleepy noise to get you to sleep soundly. Sleep can be good!

Two questions:

1. Why do you hold through earnings?

2. Why you do not collar your stocks, by selling a call at the price you were planning to sell the stock, and using the proceeds to buy insurance (puts) for your stock?

Best wishes!

Quote from Bulldog Daddy:

1. HGSI made even more money today!

2. Stock can be tricky. I looked at a stock which is trading at higher volume in after hours. It closed at around 23, and earned 0.47, but is trading at 15 to 16 range.

I tried to buy some shares at 15.17, and by the time I made the order it ran away from me. Within 2 minutes it went to 15.80 area. I missed it, even though I tried buying at ask.

Oh yes, stocks can be tricky. I still feel OK closing out HGSI at 25. But today I was in investor seminars at Schwab all day. Got home just in time to tune into the 4:30 est. conference call with STEC. By then, the quarterly summary was out, and if I had been home earlier and read it, I would have felt pretty good.

Imagine my surprise then, when I checked STEC's price in early after hours and saw that it had plunged 30%! It had closed at 23.15, and by end of after-hours, it stands at $15.76, with 12MM shs traded after hours. (50 day avg vol is 5MM.)

So today at Schwab I took a step forward in reading charts. As best I can tell (hope) there's support at around 15. Also, I just re-read financial results, and I think they are very good. So here's what I think:

1) STEC is cutting edge new tech, so it is very volatile. Even a whisper of doubt about prospective sell-through or inventory back-up sends it tumbling.

2) STEC is a smallish company with an unproven marketing effort, nothwithstanding superior technical quality (and damn good operating results, too). But small and unproven gets "investors" jittery.

3) There's buzz about pending competition in a market STEC was thought to have all to itself. But my reading of those factors says that ramping up to go against STEC in such a highly specialized market (they make ultra high end solid state drives ((SSD)) used for crucial storage by the big record storage cos. - EMC, IBM, Hitachi, Sun etc.) is not so easy. Competing tech, ISO approval, customer acceptance, etc. are a steep hill to climb. But the cost effectiveness of SSD in general needs to be sold by STEC's marketing efforts.

4) With only a 31MM float, STEC is easily manipulated by bear gangs who want to short you right out of your pants, and then re-buy and enjoy the ride back up.

So what do I do? I hang on, for about another two quarters, I think. What does anyone else think? Me, the dogs are both snoring, and I'm going to bed. [/B][/QUOTE]

 

[retaildaytrader]

Dustin,

No disrespect, but...are you trying to convince us or yourself?

I dont believe now is the time for defensive trading, but aggressive trading. This is just like 2004-2005 where one sector lead while everything else chopped. Its just a matter of identifying what is working and what is not working.

Buffet believes that coal is working. Trade coal miners then.

Quote from Dustin:

After yet another dull open I got to thinking about how hard this market would be if I was just starting out.

You guys that are not profitable, whether it's been 2 months or 2 years, need to know that right now is a time for defensive trading. This market offers very few opportunities daily as compared to the last couple years. If I had to start over in this environment I would have failed.

Months like these are for practice, to sharpen your skills. If you can develop strategies that break even, or even make a little in todays market then when volatility hits again you will be well positioned. The hard part will be surviving until the opportunities return. It may be years, but I really hope not.

There will be those that say you just have to adjust to the market, there are always opportunities etc. This just isn't the case (regarding stocks). Most good traders I know will make 20-40% of last years earnings and will be content with that, including myself.

So this is basically a pep talk. Stick with it. Protect your capital. Grind it out, and better days will come.


p.s. TZ please don't puke all over my thread.

 

[Dustin]

Quote from retaildaytrader:

Dustin,

No disrespect, but...are you trying to convince us or yourself?

I'm just commenting on what I believe to be the current state of trading based on my results, and the other long time profitable traders that I know. If you are making $$$ then congrats.

 

[riskfreetrading]

Quote from riskfreetrading:


I see support for today at 14.37 area if it gets there..

It just touched 14.37 moments ago. Let us how strong/weak the buyers would be at this level.

I expect a jump up in market immediately after Fed announcement. Let us see if STEC would join.

Update: few moments later it ran to 14.85 to face the sellers. 14.37 area is the bottom so far.

 

[Bulldog Daddy]

Riskfree, the answer to your questions is that, basically, I'm a fundamental analyst, trying to become a more short term trader. Yesterday was just the beginning for me. I picked up 1000 shs of X, put a 1 point trailing trigger on them, and just made $2,300. Look ma, I'm a big trader. Collars, brackets, following intraday, are all yet to come for me. Tom'w I go back to Schwab for my very first class on options, for pete's sake. But I am, as they say "a quick study" No lunch from Schwab, but lots of good company from the doggies

Now. Talon, you make some very strong technical points. Let's take another look at the fundamentals, which, as I've just pointed out, is essentially how I chose this stock. I'm not gonna make any money on it anytime soon. But I have good reason to believe that, in two quarter's time or so, I should snag a nice profit, or at the very least grow my hair back .

Gross margin year on year grew 44%. Quarter on quarter it grew 61%. Cash increased 272%, an absolute change of $90MM. AR increased 18% from YE08 to Q309. So they are financing more of their 54% QonQ growth in revenue (yawn). Absolute cash grew more $21MM, more than total growth in RE and APIC. Seems like cash collections are going just fine. AR allowances increased 120%, from 3% of total AR to 5%. Sufficiently conservative, and yet still immaterial.

For the same data set, in-house inventory drew down from 44% of total CA to just 15%.
Yeah, yeah, EMC is holding onto its inventory of STEC¡¦s OEM parts, but that¡¦s EMC¡¦s issue. That inventory expensed as cost of goods sold in 2010 will help EMC manage their after-tax profits next year. And after all, it¡¦s evidently EMC that¡¦s looking for more AR financing from STEC. Why wouldn¡¦t they push them around a little on inventory. ¡§We¡¦re not taking price increases next quarter,¡¨ says the big bad purchasing manager.

Competition? If some big dog could just eat STEC¡¦s lunch, then why didn¡¦t that happen to SNDK. They¡¦re in similar (but far from identical) businesses. 4X as much market cap, 7X as much float. Bigger, but easy entry? Then why? The CEO of STEC puts it this way: ¡§ all reports of competition are absolutely false¡¨.

Add back estimated reserves for marketing and sales, and take the high number (aww, come on, take it) and STEC¡¦s outlook for Q4 revenue is $105MM, or 7% up. EPS? 9% to 13% up, looking forward. Furthermore, back out 1.4MM in sales cost accruals from this Q ($5,162M - $1,400M = $3,762 net Q3 sales exp) and add it to the projected accruals for next quarter. Assuming another current Q4 expense of $3,762, plus Q3 and Q4 accruals, Sales budget will more than double next quarter to more than 7% of projected revenues. Way to keep moving a product that has, essentially moved itself to date.

So what¡¦s STEC worth today? Rock bottom dirty dog enterprise value, about $15/sh., assuming no premium to management, who owns 37% of shs. No debt, cash rich, conservatively managed, very good outlook, as long as you adequately discount the ¡§competitive threat¡¨. Who wouldn¡¦t love to have it all for 15? Imagine if the Year on Year numbers from this year repeat next year? All the little bears have been having a big picnic. But one day soon, some of them are going to get their paws bitten off.

/\ /\ I¡¦m bulldoggish ƒº
(@ @)
*
{/\/\/\/\} gggRRRR!

 

[riskfreetrading]

Quote from Bulldog Daddy:

Riskfree, the answer to your questions is that, basically, I'm a fundamental analyst, trying to become a more short term trader. Yesterday was just the beginning for me. I picked up 1000 shs of X, put a 1 point trailing trigger on them, and just made $2,300. Look ma, I'm a big trader. Collars, brackets, following intraday, are all yet to come for me. Tom'w I go back to Schwab for my very first class on options, for pete's sake. But I am, as they say "a quick study" No lunch from Schwab, but lots of good company from the doggies

Hi BDD:

You are doing well my friend. I think you would grow a lot of hair, and possibly your hair will become longer than the hair of a hippy. . We can talk about the hair cut another time!

Tell the guys at Schwab that a guy (me) was at fidelity (two years ago) and they give a good lunch. I went at the time to see what they serve in trading knowledge, but also in food. Cookies, a clam showader and a potatoes salad were really good.


Cheers!

 

[talontrading]

ok... but those weren't just technical points. we did a ton of analysis finding fundamental attributes that predicted significant price declines a few years back and found the model has held up very well. it's a semi-quantitative approach to fundamental analysis, and the real advantage is that a lot of what passes for fundamental analysis is conjecture.

for instance, you would assume a ton of cash and no debt is good right? (for the record, i assumed that too.) the historical record says not true... companies with no debt significantly underperfom! perhaps companies sitting on a lot of cash and no debt are seen as being too conservatively managed (depends of course on the cyclicality of business... businesses with stable cash flows can support higher debt all other things being equal). on our screens this stock is a top notch short and has been for some time.

i haven't seen people be successful taking positions in front of earnings and doing this kind of analysis, but i hope this investment works out well for you.

where is your stop? what would have to happen to make you think you're wrong on the position?

Quote from Bulldog Daddy:


Now. Talon, you make some very strong technical points. Let's take another look at the fundamentals, which, as I've just pointed out, is essentially how I chose this stock. I'm not gonna make any money on it anytime soon. But I have good reason to believe that, in two quarter's time or so, I should snag a nice profit, or at the very least grow my hair back .

So what¡¦s STEC worth today? Rock bottom dirty dog enterprise value, about $15/sh., assuming no premium to management, who owns 37% of shs. No debt, cash rich, conservatively managed, very good outlook, as long as you adequately discount the ¡§competitive threat¡¨. Who wouldn¡¦t love to have it all for 15? Imagine if the Year on Year numbers from this year repeat next year? All the little bears have been having a big picnic. But one day soon, some of them are going to get their paws bitten off.

/\ /\ I¡¦m bulldoggish ƒº
(@ @)
*
{/\/\/\/\} gggRRRR!

 

[Topper]

How's it going guys.. I hope everyone is doing well. I've been reading a few pages here and just wanted to add a couple things that may or may not help. The first -- free charting -- consider opening a td ameritrade account because you don't need to fund it to use their streaming tools, and, they now have a free version of think or swim which is actually a pretty cool toy. Also, other stocks with decent fundamentals besides STEC, check out: RINO CISG PEET SFSF HOGS PWRD.

All momentum plays with decent numbers and similar market caps to STEC. Just be extremely careful in these current conditions.

 

[youngtrader]

The OP sounds like a losing trader without an edge.

imo this would be a terrific opportunity for a new trader to step in (if they can make it in this environment they can make it in any environment)

 

[short&naked]

Quote from retaildaytrader:

Dustin,

No disrespect, but...are you trying to convince us or yourself?

I dont believe now is the time for defensive trading, but aggressive trading. This is just like 2004-2005 where one sector lead while everything else chopped. Its just a matter of identifying what is working and what is not working.

Buffet believes that coal is working. Trade coal miners then.

You should ALWAYS trade defensively. You want to last as long as possible in this game, right?