Aug
16
2010
It’s been an interesting last couple of weeks on the market. Earnings have been great, GDP numbers not so great and unemployment still struggling. I’ve been bullish for a long time and that’s still my long term view as we get past this “breather” in out recovery. But now may be time to take some gains off the table.
The reason I say that is the contrarian way I like to invest. Everything just seems too stable right now for me to be a buyer so I may be a seller. And my favorite thing to sell at times like this are options. You can collect money for the option, if you get called fine, if not you get free cash on a stock you like long term.
Right now I’m looking at selling Las Vegas Sands call options at $28. You get over $2 in premium, meaning if you’re called you sell the stock for over $30. I consider that a good price for that stock.
I would like to do that same thing with Sunpower but the stock is down so far I’m not happy with the price I would get if I sold. So I’ll hold out.
Bottom line is this. If you look at a stock you own and don’t think you would buy it today at the same price, you might want to consider selling.
Disclosure: The Mayor is long LVS and SPWRA.
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Aug
10
2010
I still think solar, photovoltaic in particular, is way undervalued right now. Sunpower (SPWRA) and JA Solar (JASO) both announced solid earnings today continuing performance at a time when sales are supposed to be reaching a peak.
Investors are expecting a slowdown for solar in 2011 but so far I’m not seeing it happening. And companies don’t seem overly concerned about lower demand in 2011. Costs are consistently going down, demand is picking up, it’s all good. In fact, Sunpower thinks it will lower cost per watt to $1.48 in Q4 next year. That’s 29% lower than Q4 2009. On a levelized basis, which considers land and connection costs that’s close to the cost of First Solar (FSLR), the cost leader.
Residential sales are also holding up well even without big government subsidies. The bottom line is this… Until all this doom and gloom shows it’s head I’m going to stay long solar. I’ve taken positions in FSLR and SPWRA. If interested you should also check out JASO and SOLF.
Disclosure: The Mayor is long SPWRA and FSLR.
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Aug
9
2010
IMAX is still my biggest bet right now. The market doesn’t seem to be terribly excited about it but I think long term growth will be phenomenal considering the expansion they will have internationally.
I once thought IMAX would fade into the night when the 3D craze died down but I’ve been pleasantly surprised at the share IMAX has kept in theaters. A normal opening weekend announcement from IMAX states that 8% of box office came from IMAX’s 2% of all theaters. One would assume that 8% number would eventually fall to something between 4-6% as moviegoers trade down from the new bigger theaters. But it just hasn’t happened.
Subsequently everyone is trying to get their hands on an IMAX theater and backlog is way up. In fact it will take years for IMAX to build all the theaters they have under contract. Meanwhile revenues will grow 20-30% a year and most of that money is cash in the bank.
Like I said, I’m long and believe strongly in the value IMAX has. Their operating leverage is very positive and I think this could be a $30 stock within a couple of years.
Disclosure: The Mayor is long IMAX.
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Jul
15
2010
JP Morgan (JPM) announced better earnings helped by loan losses. Since I don’t believe big banks are particularly honest or great indicators of a better economy I only take snippets from their earnings. I gloss over trading and investment banking all together. What I did see was that lower loan losses and a smaller amount put into reserves is helping results. What that means is they’re more confident about getting paid back by borrowers and seeing less borrowers default.
The other news for the day came from GE. Jeff Immelt, their CEO, said he was increasing R&D spending 18% and staking the companies future on growth from R&D. This is great news. Companies are tepid about spending R&D dollars if their uncertain about the future so this shows me that he is ready to put money to work building the foundation of new businesses. R&D leads to capital spend which leads to increased output which leads to jobs. All great indicators.
Disclosure: The Mayor has no position in JPM or GE.
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Jul
14
2010
As an alternative energy investor I read a lot of naysayer commentary about how it’s just a pipe dream or “magic” as Fortune pointed out this week. After all, we’ve been in this position before. During the 1970s there were similar cries for energy independence and talk of technologies like solar power were all the rage. Then oil got cheap, policies changed and investment stopped.
The challenges many point out are certainly true. Electric cars run on lithium batteries, which is mined in places like South Africa and Afghanistan, not exactly home grown. Wind won’t produce enough power to replace coal. Solar has a long way to go before replacing more traditional electric sources and must be turned into some other energy source to be transferred around the country/globe.
But this is where the bimbos on Wall Street and the non-technical writers get it wrong. True we don’t have a solution today. True we won’t have a solution tomorrow. But there are thousands of people smarter than you and I working on technologies we will count as givens when the energy revolution is complete. What that technology is I don’t have any idea (but I think it involves hydrogen). What I do know is I would rather put my energy future in the hands of engineers and scientists than oil companies, Wall Street and politicians. Aren’t they the ones who will create a true energy revolution?
This process will take time. It took over 100 years to get where we are with oil. But the groundswell is building faster than you think. 0.5% of our electricity capacity was added by wind turbines each of the last two years. Solar should count for similar numbers in the next five years. By then we may be replacing 3-4% of our “dirty” electricity with “clean” electricity each year. The move to replace oil will take longer but once manufacturing ramps up, costs go down and alternatives look even more attractive.
I’ve made my bets. Who do you believe will win in the end?
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Jul
13
2010
Intel (INTC) announced good numbers today with earnings of $0.50 vs. $0.43 expected. Sales also beat estimates. But hidden in in their report was the most important note for those watching the economy.
Capital spending forecast was increased $400 million to $5.2 billion. This is one of the first steps to an economic recovery because capital spending will translate into jobs for those building equipment, jobs for those running equipment and jobs for those selling the additional product. It shows Intel has enough faith in the future to invest dollars now.
Keep watching manufacturing earnings for clues on the economy. If companies are increasing capital spending, R&D and hiring we are on our way. I’d like to call this recovery a reverse slippery slope. When the ball gets rolling and unemployment falls we’ll be shot off like a cannon by the capital waiting on the sidelines.
Disclosure: The Mayor has no position in INTC.
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Jul
12
2010
Alcoa’s (AA) numbers are in. They swung to a $0.13 per share profit but what’s important in their earnings is the growth in revenue from $4.24 billion to $5.19 billion. What this tells me is that the global economy is in a much better place than a year ago and we’re starting to see that drive down to material suppliers.
The reason Alcoa is so important is what they provide, aluminum. You know of aluminum as a supply in soda cans and other miscellaneous items but it’s also used in things like airplanes, cars and manufacturing equipment. If more aluminum is being purchased it’s a bullish data point for the economy. When aluminum struggles it’s bad for the economy. So chalk one up for the bulls.
The rest of the week is more “fluffy” companies like Google and JP Morgan. We won’t get a great indication if the economy is in full swing from them. But it will be entertaining none the less.
Disclosure: The mayor has no position in AA.
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Jul
7
2010
Let’s take a quick side note from investing for a minute and talk about flying. Today a Switzerland team is taking a 24-hour test flight of a solar plane. Now solar isn’t exactly as powerful as jet fuel so this is really nothing more than a powered hang-glider but it’s a cool step.
The plane is a 262 foot wing span one man plane and if all goes well will make a trip across the Atlantic as the next step of a goal to cross the globe on solar power. If that concept can be proved it would be feasible to think a small plane could be powered primarily by solar or at least as an auxiliary power source.
Solar may not soon be able to power the world’s airplanes but it’s cool to see engineers working toward that direction.
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Jun
25
2010
Las Vegas Sand’s (LVS) Singapore casino, Marina Bay Sands, has actually been open almost two months but it’s finally fully open. Included is the Skypark, which is a surfboard shaped park on top of the three towers.
This completes Sand’s major expansion into Macau and Singapore. Sure, more is coming with three new hotels opening in Macau but the major groundwork has been laid. Now it’s time to see results.
Sands has basically gotten a pass on earnings over the last few years as they spent money on pre-opening expenses for their new casinos. They’ve also added a lot of debt with over $11 billion in debt at the end of Q1. Another disappointing quarter could be costly for Sands. They’re walking a fine line and if the economy double dips or any of their openings are lower than expected the stock could be crushed.
For now I’m still long, although I’ve cut my position by 75%. I would consider getting back in below $20 and getting out altogether above $30. Until either of those happen I’ll sit where I’m at.
Disclosure: The author is long LVS.
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Jun
11
2010
The best thing about watching market commentary is when their thesis is proven wrong in the next couple of days. But who’s going to call you on it? The never bring up terrible predictions the next time you’re on the show.
My favorite people are technicians. These are traders that look at charts and try to see a trend. Last summer all the technicians could do was talk about the head and shoulders. The market was going to go down to complete the head and shoulders trend. Then there was the V-shaped recovery. Guess they should have been talking about a lower case r.
Wednesday, Dennis Gartman (who writes the Gartman Letter a highly respected market strategist) tried to convince the CNBC audience we were headed further down the bear market. His thesis was that we are constantly starting the day at the daily high and trending downward to close at the daily low.
Too bad the last two days were exactly the opposite. Guess that’s theory is wrong.
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