Stocks-Rider

In the end, agility wins

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Okay I admit its been a while but really why would you have listened to someone who was ranked 500 unless my writing gave you goose bumps. But now that I have received a slightly more respectable position (50ish) I feel more comfortable about my rants. Here is why you should pay attention to me and what I have to say in the following paragraphs. First and foremost, it might benefit you. Second, it wasn't achieved overnight or by just trading couple of high volatile stocks. I have been gradually lurking up higher changing my strategy and keeping it as nimble as I could. This is the result of some blood, sweat and manual stop orders.

I definitely aim to come in top 10 and higher. I don't have time on my side. But I have renewed confidence.

First a quick flashback on reasons for my improvements that I think you may find useful. Why did I get higher percentage return? - (a) I finally decided to spend some time on Marketocracy instead of being a passive participant, (b) I decided to trade in and out instead of letting the positions languish given the high volatility of the markets, (c) I exploited the earnings seasons to place trades on companies that I was extremely confident of posting good results. Sometimes it backfired but for most times it netted me double digit returns., (d) Finally I built hedges in my portfolio by buying ultrashorts like TWM to avoid a free fall with the markets during down days.

Now on to Future. It is really a tough job predicting markets and every market timer is sweating in his pants. Most are predicting we have hit a bottom. But does it really help in a contest that is going to end in a month? A bottom takes weeks to form. So lets just forget about predicting business for the time being and focus on the few precious weeks remaining. Keep in mind it is excessively frustrating for active traders when time is limited and on top of it, there are these darn big range days going in both directions.

So what has worked for me in the latter half of this competition is to increase my agility in terms of pulling the plug sooner than later. Besides, the ability to not let your good trades languish for a longer time is safer and more profitable in this atmosphere. Seems obvious this strategy would have been useless had this contest been held in the first half of this year. It may have still netted you gains but you would have missed all important upswings.

Needless to say, it is important that the strategy you follow needs to change with the changing markets. I believe this and the ability to cut your losses are the two most important ingredients of a successive portfolio.

My latest positions are a result of this. Here are some comments on the open trades:

DKS: This is one of the few trades I have held for a long time. In my prior post I had mentioned that any positive announcement would send the shorts for cover big time given the percentage of float that is shorted. This is exactly what happened when DKS declared a 2:1 split in October. The squeeze practically murdered the sellers.

ISRG: My darling. I got this one before the earnings as ISRG has demonstrated a really good success rate with positive announcements and optimistic guidance. They did not disappoint in October. To top it all ISRG obediently languished for some time to form a solid base before surging again. I had anticipated this and hence I never sold ISRG even in the worst of markets.

GLD: Hedge bet

TWM: Hedge bet. Ultrashorts on Russell2000. You know they accurately say that when the atmosphere gets bearish, the small caps are the first victims that get sent to the altar.

DELL: Play upon earnings to be released this week

CHK: Steady rider, good company and play upon natural gas' increasing dominance. It has been declining recently but I am still not taking it out as it has just hit the 200 day. I love 200 day MA. I am hoping a bounce is on the cards in days to come.

SNDA: One of the few Chinese stocks I like. They are releasing earnings this week

AAPL: Christmas. iPod. iPhone. Leopard. Crazy followers. Potential Post Fed bounce. 'Nuf said.

SYNA: Love this stock. Just look at the charts. Very positive earnings. It shot up but it has come down without violating any of the technical levels. I consider this value as an excellent entry point.

MOO: Ever wondered how can you cash in on agriculture boom without knowing much about any one stock. This is the ETF for an Ag play.

DVY: As people are getting out of riskier stocks and the headline risk still remains, they are looking for defensive plays. DVY is a good example of that.

PCU: Okay this one was bad. But I can't remove it. Because this stock too is touching its 200 day MA. Anymore fall and it is out.

I hope my thought process and my picking rationale would have helped you in your own selection process. I would love to hear from you - praises, boos, questions or a silly smirk. Bring it by.

Krish

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The Enigma of "Ben"evolence

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The fed cuts are still days away (no..that wasn't a freudian slip). But you should have listened to Ben today in the first part of his speech. It seemed like he wouldn't even wait for December 11th! The guy reminds me of a lean, mean hunter on a prowl. In a tip of a hat to his colleague's speech from yesterday, Ben confirmed the credit situation is deteriorating and almost trying to whisper in your ears - "we will do whatever it takes and oh yeah (pointing at a slippery rat called rate with a ginsu knife)..that too!". He seemed to be overflowing with emotions. Okay okay his face that looks mega botoxed didn't give much away. But what did you think? We are talking about a guy whose expressions are flatter than a flitter! Anyways, he later contained the "help we are all screwed!" emotion by adding that the fed will be looking at the new data that will be released before 12/11. Really, Mr Ben? Please explain to me if that was so, why would you stick your neck so far out with the whole doom and gloom portrayal. You could have just said "a lot depends - and I mean a lot, you crazy econ perves! - on the labor report and PCE report before we can truly say what we need to do in short term". Instead Mr Ben chose to paint a very grim picture of the economy first as if almost to get his excuse / alibi ready in case of a shock and awe on 12/11. We live in such exciting times! Anyways, the words that stood out most were "alert", "turmoil", "reversal from September" and "flexible". And no I am not really taking them out of context. The words were the context! So the bottom line to me was the gist of the speech didn't just translate into a single rate cut but - surprise! - it sounded like more cuts than what the fed fund futures are predicting right now. This means Ben wants to give us a shock and awe which sounds increasingly characteristic of the new fed. 25 points is not shock and awe. Think 50..heck think 75! Yes you know what I am talking about.

Okay so how are you gonna play this? I will tell you how I am playing it.

First nothing is guaranteed. So it is important that I remain agile and make some solid picks after a lot of research with a slight bias towards the conclusions made in this post. This is what I am trying to follow. I also explained some basic tenets of this strategy in my prior post.

If you put the essence of the above speech in combination with the generally bullish move in the markets since the last three days, you would feel there are a few more solid uptrend days fairly soon. My overall sense has also turned slightly bullish albeit for a short time. While I can't predict the intermediate term direction, I do feel that 1475 in S&P seems to be the key level. I will be carefully watching that level and based on which way we turn, adjust my trades accordingly. I am planning to keep my short hedge bets (TWM) intact but reduce the position size to half. Bottom line - even after all the bullish events with my own bias towards a short term upside, unless we go farther away from 1475 regardless of the direction, we cannot be too complacent about the direction of the market. So be careful out there. you never know when and where is the next sharp turn. And Mr Market doesn't even put a sign on the road.

Krish Rathi

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Can someone tell Dell Executives not to shake in their pants while talking?

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I just posted a blog on Bernanke's comments earlier and I thought I will post another one on Dell's earnings. Hey what do you know..a bonus blog! Consider this as an early Christmas gift for all you folks out there.

Okay so I happened to listen to Dell's conference call due to my shares in Marketocracy and I want to share what I consider an interesting mix of feelings.

First, the earnings barely met the consensus estimate. The outlook was murky at best and hence the plunge in after hours. You can get the numbers from any website such as this so let me talk about some intangibles that may help you assess the state of Dell.

Surprisingly, what horrified me more than the numbers was the persona of the executive trio handling the conference call. I listened to HPQ's call a couple of weeks ago. There was such a marked difference in the degree of confidence, the amount of preparedness, the clarity and knowledge of one's own business.

I remember a time when I was supposed to give a presentation in my day job. I spent so much time making the slides fancy that I had hardly any time left for letting the content get under my skin. As a result, I was vague while talking outside the bullet points on the slides, and was mechanically turning them 1 by 1. A version of that episode seemed to be playing during the call. They had some major presentation slides but they could not respond to most of the questions with an answer that was specific enough or confident enough. The strategies in place by acquiring the relevant companies may be good from a year or two down the road. However nothing suggested me that they were finally back on track to recapture a sizable part of their previous market share let alone handily beating HPQ anytime soon.

I could go on and on. Bottom line, it was disappointing. So what is my conclusion - feeling the attitude and level of confidence during the call along with the numbers in the presentation, I came to a not-so-pleasant conclusion. Dell will suck for at least the next two quarters, if not more. Unless one of the two things happen - (a) Dell initiates a buyback program that was suspended in the past or (b) if HPQ or Lenovo decide to acquire Dell, which is not that exaggerated. As for buyback, Dell did indicate they might announce something in "early December". This means the fall in after hours may be cushioned by first or second week of December. Not to mention the fact that Ben's comments could lift the market and Dell may perhaps rise with the tide. But given the length of this contest, it doesn't make sense to experience the percentage fall, if the fall starts tomorrow. So I will watch the price action tomorrow and may dump Dell. There are plenty of other good stocks out there.

I would be interested in hearing other blogger's opinions on the state of affairs at Dell and in general - tech stocks. Thats it for now. If you are interested in my overall take on the markets, picks and strategies, please refer to my recent two posts here and here. Would love to hear comments.

Krish Rathi

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