Better than we expected
We guessed we would see a nice little pop this last week in the market wishing for a 12,662 Dow and we actually got 12,681. We though the S&P 500 would wrap up to 1,340 and it finished at 1,345. We take that as win. As far as the data point guesses we made we were batting about 60% so we will take that as well. Most importantly we made a profit last week.
For the Salve Lucrum portfolio as well as a few others, we made some quick turn around call option profits. On Friday morning, we took some profit in CMG Chipotle Mexican Grille having made a 22% profit. We also took some profit from out GLD holdings in a few account that were up between 7%-24% depending upon the account.
I did not get back in time to check out Barron's this weekend but look forward to reading it later tonight. I do like the cover story as I was talking to Robert S about the bubble of the Cloud Social Network Craze and that is the cover story this week.
It hard to say how many times we have to run into the bubble wall, but we caution all of you, don't get sucked into to some of these crazy valuation being thrown out there for the likes of Groupon, or Linked, In or Facebook. These companies will make money and they will make big money, but our advice would be wait until they do.
We have mentioned we are rereading Malkiel's "A Random Walk Down Wall Street". It belongs on every investor's bookshelf. In the book Malkiel (pg.38) talks about the DutchTulip Mania (also nicely explained in the recent remake of Wall Street with Michael Douglas). He explains how, in the 1590s the collection and ownership of prized tulips created a frenzy of everyday people who were making a fortune growing and design tulips. Until one day someone woke up and realized it was silly. The bottom fell out and people lost fortunes.
It has happened time and time again. Even before our recent internet bubble of the 1990s, we went through the tronics growth boom of 1959-1962. All you had to do was put some iteration of the word electronics in your company name and the stock would explode.
It is no different today. Companies that even hint they have a chance of making money in cloud computing and social networking and cha ching, the stock is going crazy. So how will this end folks? Yeah that would be my guess too.
There are a lot of sound tech stocks out there making a profit, sitting on gobs of cash, have a track record of making money, you do not have to speculate in the next new thing.
Now let's take a look at the week ahead with some specific opportunities to make some money. Unless otherwise noted, these are not core holding but short term trades (less than 30 days) and should be backed up with stops at the 10-20% range depending upon your risk comfort.
Baker Hughes BHI reports tomorrow and we thin we will see a miss of the 91 cents a share they are looking for. Let's say you went back to 2006 and watched every quarter unfold and got a feel for what the market did in reaction to a beat and miss. You can do it and it takes a long time to do the research.
We think they will miss we think they will slide a few percent over the next couple of weeks. I(f you do the homework and agree, here is what you could do. Buy a put option, say the September 2011 75.00 put for about 2.51 a contract. Look to make a quick 20% on the call and get out.
We can't find a good play for CIT Citigroup. They are expected to loose 34 cents and we can't disagree. Leave it alone.
Now we mentioned ITW last week and the call opting we mentioned is still doable. (We did buy in last week.) ITW should beat the 1.03 a share. If they go north of 1.05 or 1.06 look for a nice bump in the stock. We bought into August $57.50 call at 1.07 a contract. That contract can be had for $1.05.
LXK Lexmark should beat the estimate of $1.03 (Coincident it's the same as ITW), but we see no pin action. Leave it alone.
Last week we mentioned an August call option for CHRW CH Robinson at 80.00 a share which we bought for 1.38 a contract. We took out Profit Friday at the close when those contracts were selling for $1.81, a nice 31% gain. We bought the call anticipating a beat this week, but a lot of other people must have been thinking the same thing.
We were hoping for a fun play with UPS, but we don't see a beat or a miss. Look for an uneventful match of the 1.04 share expectations.
