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Don't Get Stuck On A Loss
Last week, we chose a mini-cap stock GLUU to execute a swing trade. We set a real tight stop in case their earnings disappointed. One thing about micro cap stocks that we have noted over the years is that news seems to seep out about them more than on the big caps.
We are not talking about headline news, but it seems as though unexplained movements in stock prices of micros before an earnings release seem to happen more on the micros than the large and mid caps.
We hit our stop quite quickly and took a 3% loss. GLUU continued its downward spiral and our 3% loss would have been an 11% loss had we not bailed. Lesson learned, "When an orthopedic says, 'This won't hurt.', don't always believe them." No, wrong lesson, sorry.
Lesson learned, don't be afraid to set a tight protective stop order and don't feel bad if it get's triggered.
This week, in a rush to get our spike pick in, we chose SYRG, Synergy Resources Corporation engages in the acquisition, exploitation, exploration, development, and production of oil and natural gas properties primarily located in the Wattenberg field in Denver-Julesburg Basin in northeast Colorado. The company operates 139 wells and has an ownership interest in 189 gross wells, as well as holds approximately 200,009 gross acres. Its estimated net proved oil and gas reserves included 5.1 million barrels of oil and condensate, and 33.4 billion cubic feet of natural gas. The company was founded in 2007 and is based in Platteville, Colorado.
The company has made some recent changes in operations personnel which should help the company. We tripped over this from a note from Alan Farley of thestreet.com. He pointed out the October bottom of about 4 bucks a share, its rise to almost 7.00 last week. There was some nice consolidation a few weeks ago and this breakout could be another escalation in price. Recent analysts coverage show TPs in the 8-10 range.
We are choosing this as our Spike trade getting in below 7.00. we have a stop at 6.70 and our target is 7.60. Keep in mind WE DO NOT HAVE A LIVE TRADE ON THE STOCK, YET. We are going to read a few SEC filings and do some more fundamental homework. (Actually I am waiting to see what Jerene digs us as she is getting quite good at the homework.)
While I was typing that I got an email from Jerene, who did everything I would have done, except check the SEC filings, and she was impressed with SYRG. We are seriously contemplating a swing trade based upon the spike trade parameters above.
We will be at the mercy of oil prices and currency fluctuations, but that is the crap game of picking energy stocks. DO YOUR HOMEWORK. If you want a copy of Jerene's homework drop me a note and I will share, with her permission.
It's Ok To Leave Your Toys In The Yard
One of our regular readers is kicking the tires on HAS, Hasbro Toys. Here was my read on the equity.
Here is my read on HAS.
The dividend yield of 3.61% is attractive and it looks sustainable with a payout ratio of 50.8%.
It's gross margin is attractive, but the company has missed top line sales numbers of late. The C Suite is promising a lot of cuts between now and 2015.
The forward looking P/E ratio is attractive at 13.74. HAS has a great brand and some great brand franchise licenses.
Objectively speaking, the move to get kids outside and away from gaming counsels should play nice for HAS.
The only real downside I see is that the stock has met everyone's expectations. Most target prices are in the 35-39 dollar range. It is selling at the high end of that range. If you back out the 5 dollars in cash from the current price you are still at the low end of the TP ranges. The dividend makes this a good pick, not a great pick.
If it was my pick, I'd like to get in where the 20 day crossed the 50 day back about a month ago which would put the entry point at 37ish. If you can be patient, it could come back to that level with just a minor market correction in direction.
Hope that helps.
The Clock Is Ticking
You probably know about the sequestration cuts due to take place on March 1, 2013. For those that need a brief back fill, The Budget act of 2011 signed into place in August 2011, by the President, kicked our worries bout a budget default down the road a while.
That gave the Senate and the Congress plenty of time to deal with the 900 billion or so of immediate budget cuts and the beginning of a 10 year roll up of about 1.7 trillion in cuts. Well one would think it was plenty of time.
Due to the amazing leadership in the House, Senate, and Oval office, we were under the gun to address these issues by the ned of December 2012.
Their solution was to pass the ironically named Tax Payer Relief Act of 2012, which kicked the can down the road to the new congress and March 1, 2013.
Needless to say the next few weeks should be interesting. By law, large government contractors have to give 60 day notices of significant layoffs. Much of the first 150-200 billion in cuts is to large government contractors. People like Boeing, Lockheed Martin, General Dynamics would have to announce layoffs the first week of January. (Lockheed martin did send out those notices in October, anticipating a January 2 elimination of funding.
We provided this little update as we think you will be hearing more and more about the sequestration cuts and you might want to some homework regarding how it might impact your trading, your 401 K accounts, and other investments.
More importantly, we wanted you to know that The President has promised to take a more appropriate leadership role in these negotiations and has a brand new weapon up his sleeve. We actually were able to get a picture of him at the plant where this weapon is being tested.
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Since 12/31/2012
