Sunday, November 6, 2011

Some Europe, Some MF Global, Some earnings..the usual

Another week of European madness along with the bankruptcy of MF Global rocked the US markets; S&P and broader markets finished down about 2.5%. What we are waiting for now is clarity from Greece, and what is exactly going to happen with the MF accounts. Markets opened up ugly Monday and Tuesday following the prior week of MF Global in an unstable position after investing in European sovereign debt. They had to file for Ch. 11on Oct. 31st, as of now clients are out of work and will not be getting paid until the middle of the month. A further FBI investigation will tell us that there was more than bad investments going on there, but mingling of accounts to cover up losses. Very messy, indeed.

The ES got down to around 1,215 Tuesday, a strong pivot that I was watching that day was 1,208; we didn’t get there and we rallied off of the lows. 1,260 was accomplished by day end Thursday.

Trendlines still show we are rangebound, 1,214 was the breaking point which was closely breached then a bounce right off of.

I expect we will hold a 3% up/down range this week, not really sure as to where we go yet with Greece, and the CME/MF Global margin news. Plus, with a slew of earnings reports this week yet again, anything is possible. Looking to breakdown under 1,220 and a breakout to the upside 1,280. Will we slam it again, or will we have an early Thanksgiving rally? (lol)

Was not trading last week, finally done with busy week of tests till beginning of December when finals start thank God, but besides that, saw all of my positions release their earnings statements this week with one being positive and the rest negative. Let’s look first at Eastman Kodak.

Kodak posted wider loss than expected, losing $222M dollars in the 3rd quarter, with cash reserves falling 10%. Revenues also fell, by 17% with the biggest percentages of the loss coming from the film and digital camera business. Much competition from Fuji and Canon are leading to continuing declines in Kodak shares. For now, I plan to hold my small position in the company, as I bought it very cheap in the first place (unch to minimally neg. as of close Friday). CEO Antonio Perez is bullish on 2012 with their continued growth of Inkjet printer sales (to the US Fed, lol kidding) or patent sales, which could still be in the works, will raise share prices, imo possibly upwards to $2+

Above, $EK breaking down below pivot, touching S3 @ 1.05 before bouncing off. What remains for the future of this company is to be determined….

Frontier Comminucations also reported, another not so good quarter for them with declining revenue and increasing expenses. Shareholders punished them pretty bad down below a key $6 level, then to $5.5 which held. Revenues were down over $100 million q/q due to decrease in residential and business customers switching accounts to other telecommunication services, probably that are cheaper. Revenue decline has been a problem with Frontier the past year, but they are still very ritual with high yielding dividend which can almost offset all of my losses in the company. I don’t want to feel like I’m married to it, but it was my 1st ever trade and currently my biggest position.

Studying the chart, I can see from where it previously breached 5.5, bounced off traded in a $1 range for a month broke down again, held and traded up again. Looking for it to stay above 5.5 for the continued time, will only sell out (finally) if we breach 5.5, due to company concerns, and not broader mkt bringing it down.

Invesco Mortgage Capital $IVR reported a 5th straight quarter of double digit profit, though margins are declining. I am holing $IVR for an IRA account (got to start sometime) pays the highest dividend right now out of all the REIT’s publically traded. Since they do not have to pay income tax on profits, they have to distribute 90% of their income as dividends. In doing this, they have to consistently price secondary offerings to raise capital, increasing amt of shares, decreasing share price. I am long $IVR, regardless of share price, just my opinion.

Above you can see major drop off, about 40% at the lows, after the secondary offering in August.

Earnings this week looking at Kohl’s $KSS. With the holiday shopping season right around the corner, I would be a buyer of Kohl’s here. Their fundamentals and sales appear to be very strong. They saw about a 33% growth in Net income q/q while cutting expenses. Trading at a p/e under 15 (14.1) looks cheap on valuation also. Consensus EPS is .78, I see Kohl’s trade up near $60 or breaking above it.

Above 2 photos, a chart of $KSS and Return on investment + profit margin + Gross Profit margin

One more I’m looking at for a trade is DryShips $DYRS. I had a buy stop in this name a couple months ago, but missed it by a cent on a huge ramp following. They are expected to report .15 a share. Looking at the business from 2008-present they came from a 361M loss to 172M profit, so they have definitely turned themselves around. If I can get in at a good price, I’ll pick some up.

Above, $DRYS holding above $2 right now, but well off it’s normal $4 level.

One final thought, will we continue to see more can kicking in Europe? now that Italy’s bond yields are beginning to become a bit risky, are we at the tip of the iceberg? We can’t forget about our debt problem either. Nowhere close to be out of woods yet, but trade the markets day to day, up and down, that is all you can do, watch the charts.

That’s all this week guys, I’ll let you all know via twitter (@peter_eller10) If I make any trades, have a good week of trading everyone!

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