given2invest
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Posts posted by given2invest
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The Tsunami and liquifaction pictures are nuts! Go to CNN. Cheers!
Your "Cheers!" auto sign is annoying in general but in this context it leaves me ??? ??? ???
:)
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A stock halted in the morning and throughout the day without a release has a 99% chance of being disastrous news.
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Sadly, it's most likely that the auditor didn't sign off on financials. And the people who will lose most/all the money are the yahoo message board folks. SEC is asleep at the wheel...
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15 years ago they were great. Been horrible for years though. All Spam. I filtered them out of "my yahoo". You can do that.
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Your points are noted. Again, time will tell. ;)
I'm not short and have never been. I can't wait to see how this plays out though. Cause if it's not a fraud, it will go up 5x. But me thinks fraud. I just can't figure out how Starr is wrapped up in it.
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"(1) If the company can generate so much cash as a cash cow, why it need to go public? Why did it sell shares to Starr so cheap? Remember, chinese CEOs are not stupid, they are most shrewd in the world! If you can not figure out, most likely you are cheated."
Bingo. Been saying this long before this stock become a hot topic. They raised money numerous times at completely absurd valuations with no need for the capital. If that's not the biggest red flag of all time, what is???
I wouldn't say this line of thinking doesn't have any merits, but that seems to be analogous to arguing that the market is efficient (i.e. this stock can't possibly be cheap cuz otherwise it would have been bidded up, etc)?
There are occasionally times when some stocks are traded at "absurd valuations"... the members on this board can readily come up with examples of post-bankrupt reorgs, spin-offs, forced selling, etc.
It may be true that CCME does not need capital at all. On the other hand, the founders may crave the prestige of owning a US-listed company. Sounds stretched, I know, but I know many people in China want these kinds of status symbols after having accumulated wealth.
I think we can see which side is right in a month or so when the company reports 2010 earnings.
I disagree. This is nothing like a spinoff, post-bankrupt reorg; and nothing like when a stock sells off too much after a bad earnings number. The crucial difference here is you have owners of a private business who are presented with a decision. Should I go public? If you can't answer ANY reason why the answer to that question should be yes (without it being nefarious such as it's a fraud) then I think you seriously need to step back and question what's going on.
You go public to: Raise capital for growth/acquisitions; diversify away from your concentration in 1 company; cause you think your valuation has peaked and you want to cash out. That's essentially the only legal/logical reasons to do it.
These guys sold stock numerous times at 2-4X earnings while they were growing at 50-100% a year. Either they are the world's stupidest people or this is a giant fraud. There was/is nothing inefficient about it.
I'd like to add that they are generating 10s of millions of cash a year, with no need for this capital, yet they are not returning it to shareholders. Why? Also a red flag.
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"(1) If the company can generate so much cash as a cash cow, why it need to go public? Why did it sell shares to Starr so cheap? Remember, chinese CEOs are not stupid, they are most shrewd in the world! If you can not figure out, most likely you are cheated."
Bingo. Been saying this long before this stock become a hot topic. They raised money numerous times at completely absurd valuations with no need for the capital. If that's not the biggest red flag of all time, what is???
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Wasn't it Einhorn who tried taking on Frank Stronach at MI Developments and lost?
Uccmal, what's the story between MID and Einhorn?
BeerBaron
Basically what the last poster said. Stronach is a terrible person and fleeced the company, used it as his personal piggy bank for horse racing regardless of what the shareholders wanted. He tried numerous times to get green mail and didn't succeed but it appears he finally succeeded, getting paid hundreds of millions in assets to give up voting control of the company (not actually selling any stock, simply agreeing to collapse the share structure). But yah, Einhorn misplayed this one big time.
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Myth465
my experience has been very different from yours, i am having a very hard time finding bargains, i keep looking nothing seem very good
Same. There is one stock I like (CLUB) and even that has run big from where I was buying it in the fall. In the fall of 2009 I was able to throw darts and find something to buy.
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I'd be careful with the VXX short. Everybody and their mother is putting this trade on, from VIC to yahoo message boards. It appears to be a free lunch and maybe it is but I think it's hard to calculate the odds of a huge spike in VIX. I'd agree the key is to keep the position very small.
In other news, I bought Feb VIX futures on IB this Friday at 18.35. It was the first time I've ever bought VIX futures. The market just feels way too complacent to me. Jan Futures are 16.85 I believe so I am set to lose ~10% of my capital over the next 4 weeks if nothing happens - or more if the VIX keeps on falling.
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The only reason a leap would have extremely low premiums would be if the price for puts were also very inexpensive, ie, vol is very low and people do not expect a large move either way, especially to the downside.
This isn't always true. The cost of being synthetically short versus being synthetically long is sometimes affected by the borrowing costs of a security (when it is heavily shorted).
Take SHLD a year ago for example -- you could write a put at-the-money and with the proceeds you could buy two calls at-the-money.
Totally out of whack. Write a put for 1x downside and buy a call for 2x upside. This exact scenario was brought to the attention of this board at the time. The world is full of surprises I suppose.
You are absolutely right. But in that case, if you were long the stock, you could get paid to lend it out. If you aren't able to lend stock out then yes, any time a stock is heavily shorted with a very high negative rebate you should always buy it through options (buying a call/selling a put same strike) to take advantage of this.
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I should say,it gets more complicated with deep out of the money calls and/or call spreads. But it's still just a form of leverage and an implied put.
The most strategic way to use options/leaps is when you have a very good view of what the maximum upside/downside is in a situation and you know the timeline well.
I own TIVO May 15/17.5 call spreads I paid about 35 cents for. I own these because by May, there will be a verdict in their trial against DISH. If they win, the stock is 100% going to go to at least 17.5 (based on where it went the last time they got a positive verdict only to have it overturned). If they lose, it will plummet - hard to say where - maybe $5? By paying 35 cents for a $2.5 outcome, the market was only pricing in a 14% chance TIVO wins the hearing while I think it's at least a 50% chance. I believe the option market was not pricing in the deep out of the money calls correctly. Ironically, someone today bought 20,000 May call spreads on TIVO but higher strikes (the 17.5/20 spread) and paid 32 cents.
So in my head I figured 50% chance TIVO goes to $5, 50% chance it goes to 18+. Stock is $9 today. What's the best way to play this? And I came up with the deep out of the money call spread.
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I dont quite follow your put reference. For me a leap is cheap if the premium is extremely low or there is a known catalyst to send the stock up. I dont believe black scholes pricing is correct so there valuation doesnt matter to me.
Ok, I will explain. Owning a call is exactly the same thing as owning a stock + owning a put. It's mathematically the same thing and it costs the same thing. It's called put/call parity.
The only reason a leap would have extremely low premiums would be if the price for puts were also very inexpensive, ie, vol is very low and people do not expect a large move either way, especially to the downside. If you expect a large move than you would want to buy vol and thus buying a leap would be beneficial.
Now, buying leaps on MSFT or GE or whatever is really just someone wanting an extreme amount of leverage with a maximum downside. Mathematically, assuming interest rates/borrowing is 0 (margin rates are almost that low), the following two things are identical:
(making up numbers)
MSFT is $25. MSFT Jan 2014 Leap is $5, strike $25. MSFT Jan 2014 put is $5, strike is $5. (this is only the case if interest rates 0 and MSFT pays no dividend, otherwise put and call prices would be different).
You can buy 1 share of MSFT at $25 and 1 put for $5 and you max loss is $5 and your breakeven is $30.
You can buy 1 Leap for $5 and max loss is $5 and your breakeven is $30.
In the former example, you put up $25. In the latter, you put up $5. If you couldn't/didn't want to use margin, you could buy 5x as much MSFT with buying the LEAPS vs buying MSFT at $25 and $5 puts. But make no mistake about it, it's pure leverage w/ an implied put.
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By definition, a leap is leverage + an implied put. That's it.
Right now leaps are cheap because vol is low (risk is low) and borrowing costs are almost 0.
If you wouldn't want to own a put on the stock, there is no reason to own a leap. Yes, of course it depends on the price of the leap! I figured that goes without saying. But for you to say that the leap is mispriced or cheap, then you are specifically saying the implied vol is cheap and that the market isn't pricing in the risk to the downside appropriately. But, if you think MSFT is worth $40 and its trading at 25 and a 25 leap is $5 - that doesn't make the leap "cheap" or mispriced. It means you think MSFT is mispriced and you want leverage to take advantage of the modest move from 25 to 40 without risking a ton of capital (the implied put).
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Yes, you know exactly what you will lose when you buy a leap. However, risk can be defined in many ways.
Let me give you a crude example:
MSFT is currently a value investor favorite. Cheap, low leverage, etc. The stock is $28. Jan 30, 2013 Leaps are $3.40
It would seem like this is a fantastic bargain. I mean, Microsoft won't be $33.40 in 2 years? Further, if its $37, I'd double my money on the leaps versus only making 30% if I bought the common. Why not do it?
The problem is you are paying for leverage and a "put" in Microsoft. The fact that you only can lose what you put up is why you are paying for a put. If you don't think Microsoft has much/any downside come Jan 2013 from today's $28 price (I don't) why would you buy this put? You'd be better using margin or not using options at all.
My point is options/leaps are mostly a hidden form of leverage with an implied put involved. They have their purpose, but only when you are very concerned about downside in a stock - not just because you want to put leverage in your portfolio.
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Leaps are just leverage/margin with a different name. Even worse, you are buying a long dated put on a stock that you probably think has little downside 2-3 years out.
Put another way, the only reason to ever buy a leap is if you want leverage (and can't get it through margin) and think there is a serious risk to the downside 2-3 years out. If there isn't a serious risk to the downside (that isn't priced into the leap, ie, where the leap isn't very expensive as a result of an obvious binary business risk that is coming) there is absolutely no reason to ever buy a leap.
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No, they shouldn't be cheap because they are microcap. However, one off microcaps are more likely to be cheap than a stock in the S&P 500. Now, if the S&P 500 goes down 30%, your 7x FCF microcap (with issues) will probably also decline by 30%. Or, if it's really a special situation, it will move completely independent of the market. Regardless, they aren't indicative of the overall valuation of the market.
In March 2009, I could have thrown a dart and found a stock that was cheap without issues (small or large cap). Today, I am finding it very hard.
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There are 3 with little or no debt and at those multiples, namely MGAM, FLL and LACO.
Packer
All of those have huge issues and are micro micro cap. There are reasons they trade at those multiples. But fair enough.
EDIT: I'd also say that the micro cap market is not indicative of the health of the overall market. IE, finding a $10-$50 Million company undervalued doesn't say much to me about what the S&P is going to do.
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You are correct however the previous poster has it right. When you sell a covered call you are essentially selling a naked put without holding the stock. Your downside is unlimited while your upside is capped. The only reason to do this is:
You are certain the stock will not go down but you are equally certain it will not go up ;)
In any other case, it would be better to just hold the stock or sell the stock and have no position.
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My real acid test is how many bargain stokcs are you finding? I continue to find insurance, media, gaming and healthcare bargains (cos selling for less than 7x FCF many below 5x). Some areas may be ahead of themselves (natural resources) but overall in my ponds things are still cheap.
Packer
There are no gaming stocks at 5 or 7x FCF. Further, its disingenuous to value a gaming stock on a multiple of FCF given how much debt they carry.
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Mean is pretty irrelevant I think. I'd be interested to know what the median net worth is at the cutoff of top 1%, 5%, 10%.
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I really like Reed Hastings as a CEO. The Fortune article on him is a good read as well.
I agree. I thought this letter made him look like a class act, unlike the way some CEO's have responded to a short thesis.
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thanks for this
CCME: can you poke a hole?
in General Discussion
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