Stock talk for the main street investor.
Jun 25 2010

Sands Opens Singapore Casino

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.

Jun 11 2010

Gartman Letter

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.

Jun 7 2010

iPhone 4

Apple announced their new iPhone today and they didn’t disappoint. While not quite the revolution the original iPhone was it is (in my opinion) their best improvement to the device. Lets go through a few of the features.

Display – The display is now better than your eye can even detect. In other words improvements to this display would be futile. Can’t get better than that.

Mail – Small improvements in mail but the all-inbox and thread features will be very hand for those of us who use multiple email accounts and have long threads clogging them up.

Multitasking – It’s surprising it took this long for Apple to allow the phone to multitask but it looks as if they’ve done it well. A single click on your home button and your open apps pop up at the bottom of the screen. Keep email, Pandora and Yahtzee open all at once.

Video, Pictures – The camera has front and back view, HD video capability, better resolution and a flash. The flash may be a little disappointing but I’ll take it. I really like having the camera feature and now that these features have been added why would I ever buy a camera.

Facetime – This is probably the biggest WOW of the presentation. Video calls right from your phone. You need a Wi-Fi signal but it looks amazing. Their presentation had a guy signing to someone else over the phone. The ability to make a phone call without being able to hear is pretty amazing. My hat’s off to you Apple.

I still think Apple is expensive but it’s hard to argue with their dominance in the marketplace.

Disclosure: Author has no position in AAPL.

Jun 4 2010

Using Options To Reduce Risk

I’ve recently started selling covered call options to reduce risk and increase cash in my portfolio. A call option is the option to buy a stock at a pre-defined price. For example I recently sold 4 call contracts on SPWRA at $14 expiring in July for $0.72/share. This means that if the stock is over $14 on July 16 when the options expire I will be exercised and I will have to sell my shares for $14. On the other hand if the stock is below $14, I get to keep $0.72/share. Since I own the stock the worst thing that can happen is getting called and having to sell my shares at $14.

What this does is reduce downside risk in a stock. Since I sold the options when SPWRA was about $12.50 if the stock is not below $11.78 I haven’t lost money. Best case scenario is the stock is somewhere close to $14 but not above.

To trade options you have to have special approval in your brokerage account. Personally I have approval to sell covered calls, but not uncovered calls (where I don’t own the stock). This keeps me from taking too much risk.

If you’re looking to take some risk out of your portfolio in turbulent times covered calls might be a good way to go.

Disclosure: Author is long SPWRA and short SPWRA calls.

Jun 2 2010

What Will Happen To BP?

As BP tries to stop oil from gushing into the Gulf of Mexico I was asked recently if this will lead to bankruptcy for BP. It’s certainly possible and would be unprecidented to take down an institution so large and seemingly stable. So lets look at some back of the napkin numbers…

BP had $16 billion in cash at the end of last year. That should be the first thing chewed up by cleanup and lawsuits. Last year they generated another $16 billion in free cash flow, most of which was returned to shareholders. Say they spend $4 billion in cleanup (recent estimates are they’ve already spent $1 billion) they would have ~$28 billion by the end of the year to pay liabilities.

Consider less liquid assets they have like other drilling rigs, Castrol, land, etc and you would have to see $60 billion or more in lawsuits for BP to go under. They’ll be able to delay some of their payments in court so the cash thrown off by the business can be used for payments in the future. Certainly not an enviable position but I just can’t see them bankrupt right now.

It’s too bad that’s the case. Causing a disaster like this should leave BP on the ocean floor next to the oil rig that blew up.

Disclosure: I have no position in BP.