market speculation for October

[KTP]

I think MSFT may make you some cash, but there are a lot better investments out there IMHO. And I'd bet that investing in a DOW index fund outperforms MSFT over a 15 year period (and certainly a lot less risky).

You may notice that MSFT pays a 2.5% dividend yield and Apple/Google pay $0.00. You might look and say "this makes MSFT a superior investment choice". But I see it as them not knowing what to do with the extra cash on hand so they distribute it to shareholders. AAPL and GOOG use their retained earnings and reinvest them for innovation or buying companies that give them an edge. Just my take.

Oh I quite agree with you...zero arguements. Long term I would put my money in just about anything else, but short term everyone likes golden apples and rose colored googles and are ignoring the little guy with 6 trillion patents and an income stream that perhaps while declining in certain areas, is still printing money faster than the Fed. It should be trading at about $27 now, and if earnings are a pretty good beat, then there is a good chance for $30. I don't know that I will have the willpower to hold the calls through earnings if there is a runup to 26.5 before earnings.

Long term I think I would go into healthcare stocks. I have been picking out a few of the better looking stocks that make up Vanguards VGHCP fund and am doing pretty well. My latest investment in Medtronics (MDT) is up around 8% from where I bought it a few days ago.

[ea1776]

Oh I quite agree with you...zero arguements. Long term I would put my money in just about anything else, but short term everyone likes golden apples and rose colored googles and are ignoring the little guy with 6 trillion patents and an income stream that perhaps while declining in certain areas, is still printing money faster than the Fed. It should be trading at about $27 now, and if earnings are a pretty good beat, then there is a good chance for $30. I don't know that I will have the willpower to hold the calls through earnings if there is a runup to 26.5 before earnings.

Long term I think I would go into healthcare stocks. I have been picking out a few of the better looking stocks that make up Vanguards VGHCP fund and am doing pretty well. My latest investment in Medtronics (MDT) is up around 8% from where I bought it a few days ago.

true, forgot this thread was about "speculation". good luck on those calls should you decide to hold them through the earnings report.

My mid-term / long-term strategy is revolving around growth in Chinese domestic spending, USD inflation, oil companies, off shore drillers (boy are those undervalued), "traditional" energy (since I believe it's been unfairly beat up by euphoric promises of "green energy"), and technology/IT/infrastructure in India.

[gambler2075]

You know how this goes...as soon as the big boys recommend something, it is usually a bad investment.

Hehe, so true, so true. If you think about it, it makes complete sense. Let's say you had the power to recommend or bash a stock, as an analyst. You know that the moment you start recommending a stock, the price will go up. If you had not bought your position yet, then it is just going to make your shares more expensive to buy, and you are shooting yourself in the foot by recommending a stock. Therefore, the time to recommend or bash is when you are actually contrarian, and want to sell or accumulate, respectively. This makes complete sense and allows you to have the volume of shares to do what you want. So, imo, if you want to make money in the stock market, you need to become contrarian, because IMO, it is what the big boys are doing behind the scenes. If you can't beat 'em, join 'em.

Watching ARNA (FDA decision tomorrow). As a contrarian, with rejection (imo) mostly priced in due to the month long slow capitulation of the longs, and 40% of the float short, I will be watching closely.

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[KTP]

Screw it, I am going to hold through earnings. It is only $4000, and I have really good feelings about this quarter and next quarter. Win7 mobile is getting great reviews, record breaking sales of Win7 desktop, xbox live rolling along smoothly, the Kinect gaming which is at least going to be a must have fad if not a super hit.

Could be looking at a $50 stock soon (maybe not by Jan 21 though). I am telling myself definately will sell at $30.

Probably.

[gambler2075]

Watching ARNA (FDA decision tomorrow). As a contrarian, with rejection (imo) mostly priced in due to the month long slow capitulation of the longs, and 40% of the float short, I will be watching closely.

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Went into the close yesterday with 50K shares of ARNA at 1.47. News spike today came out and I bailed at 1.74, +13.6K$. Classic contrarian buy. Still think they get the CRL today, gap down monday, then maybe short cover.

http://img97.imageshack.us/img97/2839/20101022arna.jpg

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[gambler2075]

Screw it, I am going to hold through earnings. It is only $4000, and I have really good feelings about this quarter and next quarter. Win7 mobile is getting great reviews, record breaking sales of Win7 desktop, xbox live rolling along smoothly, the Kinect gaming which is at least going to be a must have fad if not a super hit.

Could be looking at a $50 stock soon (maybe not by Jan 21 though). I am telling myself definately will sell at $30.

Probably.

These are the Jan 11 27.5 Calls? 0.38 by 0.40?

hmm... personally, as you know, I think the markets are on the verge of absolutely tanking. Of course, 4K$ is alot for some, not for others, and as you said it is a speculative portion of your portfolio. Personally, I am actually fairly tempted to go long either TYP or TZA, although there are a few other FDA plays I am looking at to go into the end of this month...

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[KTP]

Ya, these are the $27.50 Jan 2011 calls. Controlling 10K shares, I would do pretty good if the stock bumped up to $30 ($21,000+ gain on $4K and change investment). It really all depends on exactly how much they blow past earnings and how the elections turn out, and if the market has a correction...so many variables.

If by some stroke of luck I speculated correctly, I am going to sock away half back into stable stuff, like Mcd, Mrk, Xom, and maybe try some of your pharma plays with the other. It would be tempting to see how far I could go with the whole batch but I too think the market is going to correct soon.

[gambler2075]

Ya, these are the $27.50 Jan 2011 calls. Controlling 10K shares, I would do pretty good if the stock bumped up to $30 ($21,000+ gain on $4K and change investment). It really all depends on exactly how much they blow past earnings and how the elections turn out, and if the market has a correction...so many variables.

If by some stroke of luck I speculated correctly, I am going to sock away half back into stable stuff, like Mcd, Mrk, Xom, and maybe try some of your pharma plays with the other. It would be tempting to see how far I could go with the whole batch but I too think the market is going to correct soon.

I do think that ARNA gets a CRL today in 16 minutes (8pm, after AH closes) and then gaps down monday. Right now, in AH, the momo is trying to buy, believing that no-news is good news (i.e. the FDA will delay in order to see if the rat cancer data was all that bad) But I still think they get smashed with a CRL but then I also think there is a decent chance of a short covering bounce monday. I don't have a position after I sold this AM.

AVNR is another interesting one. It is getting beaten down on fears of the QT prolongation issue that smoked AMLN a few days ago. AVNR is one of the few that has an SPA agreement with the FDA so basically it tried addressing the QT issue by going lower dose on the Quinidine aspect of it's drug for PBA. Personally, I think if you absolutely had to speculate on an FDA play, AVNR is a decent choice in that it probably has one of the highest likelihoods of success. FDA PDUFA date Oct 30, I believe. Of course the FDA has been on a CRL-rampage recently so I dunno. There were more deaths in the AVNR group compared to placebo but I don't think it was statistically significant. Still, I am watching closely.

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[gambler2075]

Went into the close yesterday with 50K shares of ARNA at 1.47. News spike today came out and I bailed at 1.74, +13.6K$. Classic contrarian buy. Still think they get the CRL today, gap down monday, then maybe short cover.

http://img97.imageshack.us/img97/2839/20101022arna.jpg

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Bought 500 shares of ARNA after hours at 1.68, BRING IT ON, BABY!!!

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p.s. I am a gambler and I can't help myself :P

[KTP]

Bought 500 shares of ARNA after hours at 1.68, BRING IT ON, BABY!!!

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p.s. I am a gambler and I can't help myself :P

Wait...you went long instead of short? Is this because 42% of the float is short, so you figured to bet the other way?

Well, it is less than a $1,000 investment, which is sofa money for you, but good luck!

[gambler2075]

Wait...you went long instead of short? Is this because 42% of the float is short, so you figured to bet the other way?

Well, it is less than a $1,000 investment, which is sofa money for you, but good luck!

Well as I see it, there is about a 85% chance of a CRL, which may gap the price down to 1.30 but probably wouldn't do much more than that. A delay to review the data would be viewed as a positive and the pps would probably gap up to 2.25. maybe 14.95% chance. An outright approval would cause the PPS to jump up to 8-9$ maybe a 0.05% chance.

Remember that basically a rejection has been factored in, due to the pounding from 8 down to 1.68. So this is completely different than buying ARNA at 8...

we will see... heheh

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[gambler2075]

Wait...you went long instead of short? Is this because 42% of the float is short, so you figured to bet the other way?

Actually, in trading circles, this is known as a total Costanza play, because of this Seinfeld clip... probably one of my favorites as a contrarian.

YouTube - George Costanza Does The Opposite

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[KTP]

CRL is what, a letter saying they need more information before they can approve or deny a drug?

A good play would be to buy 10K or so shares at $1.30 if the CRL is issued Monday morning, then sell tuesday or wednesday when people start jumping back in?

I have to admit the pharma stuff looks attractive just from the fact that you don't have to pay $$$ per contract like you do with options, yet you control a bet that has similar large swings. I would have traded my msft call options several times this week if not for the $9.95 + $0.75 per contract. At $85 a trade, it kinda eats into trying to eek out $300 here and there.

[gambler2075]

CRL is what, a letter saying they need more information before they can approve or deny a drug?

A good play would be to buy 10K or so shares at $1.30 if the CRL is issued Monday morning, then sell tuesday or wednesday when people start jumping back in?

I have to admit the pharma stuff looks attractive just from the fact that you don't have to pay $$$ per contract like you do with options, yet you control a bet that has similar large swings. I would have traded my msft call options several times this week if not for the $9.95 + $0.75 per contract. At $85 a trade, it kinda eats into trying to eek out $300 here and there.

So a CRL letter is a complete response letter, which is basically saying that the drug is not approvable at this point. Meaning that usually the company has to do some other study to seek approval again. This could be a whole different trial, that could take years, or it could be something as simple as a REMS

A Reckoning for REMS: FDA’s Risk Program in the Spotlight - Health Blog - WSJ

With ARNA remember that there is a HUGE short interest, like 40% of the float. And they need to cover at some point, and a gap down CRL would be a perfect opportunity for that. Remember that this stock has been thought to have rejection in it's future for over a month now... and those longs are getting bled out little by little. So rejection imo is mostly priced in. A gap down would be likely on a CRL but would be a trading opportunity, imo. Ideally I would like to see some consolidation if it gapped down (i.e. traded at a fixed price for maybe 2-3 hours) and then there would be a decent chance of a short covering bounce. Remember that ARNA has a decent amount of cash too... fortunately they diluted at 6.50 on this last run up, so they have 60M$ more in cash. Current Market cap of 183M$. They do have debt of course...

If you look at the individual votes I think it was 9-6 against, with rat tumors being a big (and imo slightly overblown) issue. the FDA panel did not have a toxicology expert on it, and that admission was what rallied the stock today. If you go to seeking alpha you can see some good analysis about the stock. Here is one article

Arena Pharmaceutical's Lorqess: A Briefing Document Analysis -- Seeking Alpha

Scroll down to the articles section of this link and start reading for more ARNA info

Arena Pharmaceuticals Inc. (ARNA) Stock -- Seeking Alpha

If I were playing for a bounce, I would play for a short covering bounce of about 20-30%, over probably a few hours. I would probably sell by end of day, or if that short covering bounce was 20-25%.

Will be watching closely on monday. Long 500 shares 1.68 average, only. I guess no news tonight.

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[gambler2075]

Craaap. Now Morgan Stanley is recommending buying Jan call options on microsoft.

Buy Microsoft Call Options on Sales Gains, Morgan Stanley Says - Bloomberg

You know how this goes...as soon as the big boys recommend something, it is usually a bad investment.

Honestly, I finally clicked on that link and read the article. To be honest, this type of pumping should be illegal, imo. When retail investors pump a stock so they can unload, and then sell into the resulting buying strength, it is illegal. Yet when a big investment house does it, people buy buy buy!!!

The fact that this article is out, means (to me)

1) The big boys have already bought and need people to dump their shares onto. Yeah, they might run it up a bit to get more suckers to buy, but they have already done the vast majority of their buying. Let me ask you this: If you had such a great investing idea, do you think you would

a) Buy BEFORE you told everyone, AND THEN tell everyone,

or

b) Would you spend all this time and effort researching some great investing idea, but not make any money off of it, by telling the public FIRST and THEN buying the shares at an even higher price?

Seems pretty obvious. So for me, this is the perfect reinforcement of my contrarian tech thesis, which is that the tech stocks are massively overbought (and so is the market) and I would get the heck out of tech, so to speak.

This also reminds me of the alternative energy thesis I had right before the elections. Once Obama won the elections, I knew he was very pro-alternative energy, and I knew that that momentum into alternative energy would build, until Jan 20th, when he was sworn in. So I knew that I had to get into the alternative energy (solar) trade, and hold as the momo inevitably came in.

At the time, my account was pretty small, maybe only 10K or 15K in total, and I went heavy into JASO, a solar company, at about 3, mid dec 2008. Of course, I knew it was going to get bashed left and right, as the big money loaded up... and then, once they were done loading up, they would tell everyone "Guess what!!! Obama is PRO-SOLAR!!! BUY BUY BUY!!!" and that is exactly what they did. Meanwhile, they unloaded at the 5-6$ range.

But my point is that I knew that the analysts who were bashing were being total bastards, as they usually are, and that every bashing article or opinion they came out with was just making my conviction more firm that solar was a huge buy at that time. And it turned out to be, and I made 6 or 7K in a few weeks, which was a large amount of money for me at that time.

So my point is that when an analyst pounds the table as a buy, be very, very careful of their motives.



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