Closing 1 Trade ($AMZN, $ETSY)

By: ispeculatornew
Date posted: 06.23.2017 (6:19 am) | Write a Comment

As much as Amazon has been in the news, Etsy has been on quite a streak and my short position has not done well in recent weeks so I will be closing the trade on this morning’s open. I do remain very skeptical about ETSY’s longer term prospects but it does look like it will be able to have a shot in competing against the likes of Amazon so it will be interesting to follow. As is always the case, you can see my 2017 (and previous years) long & short tech stocks here:

http://www.intelligentspeculator.net/livetrades

 

New Trade: Long Paypal (PYPL) & Short IAC Interactive (IAC)

By: ispeculatornew
Date posted: 06.21.2017 (5:53 am) | Write a Comment

Today I am opening my 12th trade of the year in what has so far been a good year. As is always the case, you can see past 2016 (and previous years) trades here:

http://www.intelligentspeculator.net/livetrades

Let’s start off by looking at the numbers:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaEarningsRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
IACIAC/InterActiveCorp102.9636.9824.3261.09-2.824.523.511.138/2/201739.233.7833.02
PYPLPayPal Holdings Inc52.5244.0524.9334.117.244.3312.231.187/20/20178.96N/AN/A

Revenue growth for IAC has come down quite a bit and I do think that PYPL will be able to keep up its current growth in the short to medium term.

 

Long Paypal (PYPL)

Paypal is a very interesting story right now. Not only does its main business participate in the growth of ecommerce and online payments but it also owns Venmo, an incredibly popular P2P payment solution. Paypal has been in the news a lot recently as the big ecosystem players continue to take stabs at its main business. Just recently, Apple announced it would be possible to do P2P payments through Apple Pay using iMessage which does sound like a big threat. I do think it is and I continue to believe Paypal will struggle to remain dominant against these much bigger players. The threat does seem a bit overblown at this point though and I do think PYPL will continue to do well in the short to medium term. Why? Because online payments are a very fast growing business and more than one player will do well so I think PYPL is very well positioned.

 

Next earnings: July 20th 2017


Short IAC Interactive (IAC)

IAC Interactive continues to be an interesting stock to follow but to me the main story remains that IAC has struggled to come up with the next big thing which has translated into slower revenue growth. The stock did see solid acceleration and that has been mainly caused by improved profits but as you can imagine, that will be more difficult to sustain without better top line growth.

 

Next earnings: August 2nd 2017

Disclaimer: Prior to opening this trade, I do not hold a position in PYPL or IAC

How will Deregulation Affect the Financial Sector?

By: ispeculatornew
Date posted: 06.20.2017 (6:46 am) | Write a Comment

President Donald J. Trump has been mired in controversy since he was sworn into office. His agenda has been hamstrung by obstructionist Democrats and more than a handful of skeptical Republicans. His ambitious objectives such as building a border wall, imposing tariffs on foreign countries, repealing and replacing Obamacare, and deregulation have been stopped dead in their tracks, or have they?

While the media focuses its attention on drawing parallels between the Trump campaign and Russian election interference, the Trump White House has been quietly going about passing legislation to undo the Obama-era doctrine of extensive government involvement in most every aspect of corporate America.

Foremost among the changes sought out by Trump and the Treasury Department is the redrafting of Dodd-Frank. This comprehensive piece of legislation was passed in 2010 as a response to the global financial crisis that developed after Lehman Brothers collapsed. This set into motion a cataclysmic series of events that wiped out trillions of dollars from global markets and threatened to spiral into a global depression.

Obama and his team sought out legislation to prevent banks from over lending, by requiring them to meet with minimum stress test requirements. In early June 2017, landmark legislation was passed by the House of Representatives to radically transform the manner in which the financial system operates in the United States. The banking system remains the structural bedrock of the US economic engine. Too many changes and lackadaisical regulations may seriously undermine the performance and the credibility of the US financial system.

Banks and Financial Institutions Abuzz with Trifecta of Policies

Banks are strong when they promote lending, investment and saving – those are the 3 tenets of economic growth and prosperity. Back in the 1930s, the Glass-Steagall law was passed which recognized the separation between investment banks and commercial banks. That has since eroded, and the law was repealed in 1999. Banks have turned the corner when it comes to liquidity and credibility since the passage of Dodd-Frank in 2010. The stringent regulatory requirements inherent in the legislation ensure that banks will not over lend and are capable of withstanding significant stresses in the economy.

These measures also enhance client protection and ensure that a modicum of solvency, respectability and structural strength remains intact. Any failure in the performance of the economy or the bank should not adversely affect the economic system overall. There are now calls for the stress tests to be revisited, amended, and updated to meet current market conditions. We see evidence of renewed interest in bank stocks according to  Lionexo options trading experts. The financial sector is buzzing with the multi-pronged approach to revamping it in the form of Fed rate hikes, deregulation, and decreased taxation.

What Sort of Legislation Would Be Beneficial to the US Banking Sector?

Banks will be well served by determining issues like share buybacks and increasing dividends once the stress test results have been acquired. Banks are also currently limited in the amount that they can invest for the own profit/loss portfolio. Fortunately, the global community has toiled long and hard to create a standard to prevent a return to the conditions that precipitated the global financial crisis.

Unfortunately, US regulatory agencies have dismissed global standards as insufficient and have gone further to impose strict limitations and performance criteria on US banks. This has negative ramifications and could result in the US financial system being defunct. The CEO of Morgan Stanley (MS), James P. Gorman, believes that the US financial sector should take the time to digest the current rules and double down on what the economy requires to generate job growth, investment, and increased savings.

Closing 1 Trade ($AAPL, $IAC)

By: ispeculatornew
Date posted: 05.05.2017 (5:28 am) | Write a Comment

It’s been a good year and the portfolio does still have a 10.61% return so far this year but this morning I will be closing my first losing trade of the year, as the trade from February 10th long Apple (AAPL) and short IAC Interactive (IAC) turned bad when IAC exploded higher. As is always the case, you can see my 2017 (and previous years) long & short tech stocks here:

http://www.intelligentspeculator.net/livetrades

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If Le Pen Wins, Here’s What Assets You Should Keep an Eye On…

By: ispeculatornew
Date posted: 05.05.2017 (5:21 am) | Write a Comment

The U.S. equity market has been up over 1%, the week of the release of the first round of the French Presidential election results. Now, the SPDR S&P 500 ETF (NYSEARCA: SPY) was up 1.49%, the iShares Russell 2000 ETF (NYSEARCA: IWM) was up 1.35% and the SPDR Dow Jones Industrial Average ETF (DIA) was up 1.87%, the week of the French Presidential election first round results. Now, this was primarily due to Macron’s slight lead, and traders and investors began to put risk back on the table. That said, safe havens have been down significantly after risk-on sentiment was back. Although traders and investors have shifted away from safe haven assets, the results of the final round of the French Presidential election on May 7, 2017 could surprise the markets, if Le Pen wins. Now, there are some exchange-traded funds (ETFs) that investors might want to keep an eye on ahead in an event of a Le Pen win.

Gold-Related ETFs

The SPDR Gold Shares (NYSEARCA: GLD) was down just over 1% on the week, as of April 28, 2017. The SPDR Gold Shares aims to provide investors with investment results corresponding to the price of gold bullion. Since gold is seen as a safe haven asset, in the event of a Le Pen win, there should be an increase in political risk, and in turn, gold prices should rise. This should drive GLD higher, if Le Pen wins.

According to trader Jason Bond, “Another asset traders might to keep an eye on is the Market Vectors Gold Miners ETF (NYSEARCA: GDX), which I’m currently long. Now, this a long-term play and I think the price of gold should rise in an event of a Le Pen win, and this should trickle down into GDX.”

Source: TradingView

If you look at the performance of GLD and GDX on the hourly chart shown above, these two ETFs trade in tandem, and could both benefit in an event of a Le Pen win.

Euro-Related ETFs

The euro could experience a high degree of volatility before, and after, the final round of the French President election. Now, the Guggeinheim CurrencyShares Euro Trust (NYSEARCA: FXE) aims to track the price of the euro, and if Le Pen wins, this ETF should fall significantly. We’ve seen FXE rise 1.75% over the past week, after Macron led the first round of the French Presidential election.

“Traders who are highly risk tolerant may want to keep an eye on the ProShares UltraShort Euro, in the event of a Le Pen win. I’m currently long this inverse leveraged ETF, and believe the euro could fall ahead of the final round of the election,” one trader stated.

The ProShares Ultrashort Euro (NYSEARCA: EUO) aims to provide daily investment results correspond to two times the inverse of the daily performance of the USD price of the euro. Consequently, this is considered a highly risk ETF.

Here’s how EUO and FXE performed recently, on the hourly chart:

Source: TradingView

The Bottom Line

The final round of the French Presidential election is coming up, and in the event that Le Pen wins, gold-related ETFs could see a rise, while the euro could fall. Consequently, GLD, GDX, EUO and FXE should be in focus both before and after the election.

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Ecosystem Plays Continue To Dominate ($GOOG, $AMZN, $AAPL, $FB, $MSFT)

By: ispeculatornew
Date posted: 04.28.2017 (5:51 am) | Write a Comment

For years I feel like I’ve been discussing the “ecosystem play” and I certainly wish I had been able to buy an ETF that held all those plays. In this 2013 post, I didn’t include Microsoft but started including it in 2014 as it became clear it would successfully adapt to this new digital world:

Making The Case For An Ecosystem Play

I’ve also argued that very few other players will manage to thrive in an environment where the ecosystem players are able to leverage their power and users and that theme clearly remains relevant. Yesterday, Google and Amazon both reported earnings and both crushed it. They are all fighting their own battles but each have their own clear strengths.

How are these 5 ecosystem plays doing now? Take a look at the largest companies by market cap as of April 26th:

Of course, once that data incorporates Amazon (AMZN) and Google (GOOG) market gains at the end of the day, the picture will be even more clear. Even Alibaba (BABA) which stands at #10 could also be included in the “ecosystem” play although it would be the Chinese one. Impressive isn’t it? I also expect Facebook (FB) to deliver very strong results next week.

Here is the return since that 2013 post:

The Most Surprising Part? It’s Still Very Early

I’d argue that even though these companies are already the top market caps and have done incredibly well over the past few years, they still have incredible upside. I’ve just written an article about Facebook’s upside that will be published very soon, please sign up to our tech newsletter if you’d like to be notified when it’s out (hopefully later today). My main argument though is that these companies are now able to leverage their power to dominate a long list of industries that are quickly moving online such as software, media, news, entertainment, etc. I’ve argued that some names (notably Netflix) will continue to do well and actually leverage those ecosystems but I’d argue those will be exceptions.

More on the ecosystems to play but I felt like I had to take a look back after looking into the GOOG and AMZN earning details.

Have a great weekend

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Financial Advice And Its Role In Investment Success

By: ispeculatornew
Date posted: 04.27.2017 (3:31 pm) | Write a Comment

Investmenting can be a daunting prospect. The choices, jargon and complexities can at times become overwhelming. We often justify waiting, but the only way to enjoy the long-term benefits is to get started. You could try go it alone by reading the latest investment news and keeping a close eye on market fluctuations, but consulting an independent financial advisor will most likely improve your chances of success.

The role of independent financial planners is to assist with long-term financial planning, using their experience and objectivity to help you achieve your goals. More than mere product pickers, they help you meet the full range of challenges you may face.

Avoid common investing mistakes

Independent financial advisors can help you make the right decisions for your circumstances and, most importantly, avoid the risks of investing on your own. These include:

  • Investing without a financial plan

A detailed plan is critical to your financial freedom. An independent financial planner can help you develop a realistic strategy, tailor made to your financial needs and goals.

  • Picking the wrong product

There are truly a mind-boggling number of investment products available, each with their own objectives and tax structures. An advisor will help you make the right choices to suit your circumstances.

  • Ignoring the effects of inflation

Inflation erodes the value of your money with time. An advisor can help choose the right product to achieve returns that, at the very least, compensate for the effect of inflation.

  • Not preserving your retirement savings when changing jobs

Don’t make the mistake of spending your retirement savings if you are retrenched or change jobs. It is highly likely that you won’t be able to retire with enough savings to live on. An advisor is able to compile and help you evaluate the best options available at the critical juncture.

  • Focusing on one asset class or market

Diversification is one of the keys to successful investing. As the saying goes: “ Don’t put all your eggs in one basket”. An independent financial advisor will help you to diversify your investment portfolio, broadening your exposure to different investment options.

  • Making decisions based on emotions

Investors are known to be emotional in their decision-making and poor timers of the market. They destroy the value of their savings by switching between investments at the wrong time. Advisors can help you avoid these emotional pitfalls and develop a more rational plan of action.

Questions you should ask your financial advisor

Your relationship with your financial advisor should be based on trust, so it is imperative that you feel comfortable before becoming a client. Not all advisors are equal so here are a few questions to consider when evaluating a financial advisor:

  • Are they independent?

There are two type of advisors, independent and tied agents. Independent advisors do not earn any commission off the products and do not work for a particular product provider. Tied agents are employed by product providers and may have incentives to sell certain products.

Ensure that your advisor is independent, since their objectivity will help set you on the road to your financial goals. They can help you differentiate between the numerous products available and select one that meets your circumstances and needs.

  • What are their qualifications?

The Financial Services Board (or FSB) must, by law, license all financial advisors. This requires that the advisor pass a regulatory exam and fulfill the Fit and Proper requirements, as set out by the FSB. These requirements include integrity, honesty and competency. An advisor’s maintenance and development of their professional competence is evaluated by the FSB on an ongoing basis.

Find out about your prospective advisors academic history or any other credentials. It is important to read and understand the disclosure documents provided by the advisors. This will inform you of which products your advisor is licensed to recommend and offer advice on.

  • What are their fee structures

Full disclosure and total transparency is very important. Make sure your advisor explains, upfront, what fees you should pay and how they work. Typically, fees are charged as a percentage of the investment’s value and there might be an initial fee, as well as an ongoing fee.

Some advisors charge directly for the advice they provide (typically an hourly rate). Make sure you understand the fee structure before agreeing to anything and do not pay any fees that you have not agreed to.

  • How can they help to grow your wealth?

Good financial advisors take the time to understand your needs and help to develop a plan that reflects your risk appetite and your goals. Advisors help you to gain more discipline and be more rational during the investment process.

Emotions often lead investors astray, causing them to buy and sell at the wrong time or switch between products, which could decrease the value of your investment.

Where can you find a good independent financial advisor?

Trust is one of the key considerations when it comes to choosing a financial advisor. They help you make some important life decisions so you shouldn’t take this process lightly. A great starting point is a recommendation from someone you trust and who’s judgment you value. Another option is to contact the Financial Planning Institute of Southern Africa (or FPI).

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Not Buying The EBAY ($EBAY) Turnaround Story

By: ispeculatornew
Date posted: 04.12.2017 (5:55 am) | Write a Comment

While looking at different pieces of news about the stocks that I follow, I ended up on this piece of analysis done by Barclays where Ross Sandler explains that he expects 2017 to be a turnaround year for EBAY. Really? I had strong doubts but I did decide to do additional research. He blames EBAY’s struggles on 2 main reasons:

-losing market share to Amazon
-customer security concerns following a 2014 data breach.

He also explains that EBAY is better positioned now that it puts more focus on fixed pricing sales and also compares the struggle to what Expedia (and I’d add Tripadvisor) lived when they made significant technology models. Finally, they also declare Stubhub to be a significant source of revenue with potential contributions of up to $1B in 2018.

Data Breach Impact Is Overblown

I personally consider the 2014 breach impact to be overblown at this point. It did have an impact of course but I’d argue that many others have had similar issues and that it’s been over 2 years. Customers that are still not comfortable with EBAY will likely not become so anytime soon. I personally don’t buy it.

It’s All About Amazon

The other main point, Amazon is the overwhelming factor that will determine EBAY’s success in my opinion. As I wrote in my most recent piece about Amazon, I am a skeptical that EBAY even has a shot at competing. Yes, the ecommerce pie is growing quickly but so is Amazon’s share of that pie. Why? Because it’s business model is unlike any other competitor.

One benefit that EBAY has compared to Amazon is that given its business model is based off of being a true middle man. When EBAY clients buy items, they end up paying the seller and receiving the item directly from the seller. That means EBAY has very little true fixed costs. EBAY collects a fee from the seller and if the volume increases 5-10% or much more, EBAY will collect that much more.

The downside though is that EBAY has much smaller control on the overall customer experience. A big part of that is shipping of course and that makes a world of difference. Take a look at this chart of where consumers now start their shopping searches:

Amazon is increasingly dominant and that is because not only does it have incredible customer service but its shipping service is heads and shoulders above everyone else. As eBay announced it was working on getting guaranteed 3 day delivery on 20 million of its items, Amazon continues to work on expanding its same day and even 1 hour delivery. They’re obviously operating at completely different speeds and that makes a world of difference for customers.

Another critical space where Amazon is gaining an advantage is through its Prime service, one of its booming sources of revenues. Yes, Amazon is incurring costs for the services it offers to those customers such as cloud storage and video offerings. That being said, it is also a big part of the reason why tens of millions of the more valuable consumers shop with Amazon as a default. All of that market share is adding up in terms of overall shipping costs but its helping Amazon get closer to its customers through new warehouses, scale in operating its own fleet of planes and freight ships and will in theory mean that its shipping costs/unit should decline over time as it gains more scale. Ebay on the other hand does not have such ambitions or plans to get there. The other benefit of course is gaining leverage over suppliers in trying to dictate terms and products offered but also gaining more data than anyone else about its customers to offer a more tailored experience when they do visit the website.

eBay Can Survive But Not Thrive

In the end, my opinion is that while eBay will obviously continue to exist and will do well with some segments such as Stubhub, I do expect the company to continue losing ecommerce market share for the foreseeable future as will be the case for most of Amazon’s competitors given the current positioning. That makes it eBay a tough buy at these levels.

Disclaimer: Currently hold a short position on EBAY

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New Trade: Long Facebook (FB) & Short Match (MTCH)

By: ispeculatornew
Date posted: 04.03.2017 (3:00 am) | Write a Comment

Today I am opening my 11th trade of the year in what has so far been a good year. As is always the case, you can see past 2016 (and previous years) trades here:

http://www.intelligentspeculator.net/livetrades

Let’s start off by looking at the numbers:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaEarningsRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
MTCHMatch Group Inc16.3326.7315.35-3.819.84.111.94N/A5/2/20174.86N/AN/A
FBFacebook Inc142.0543.6821.123.7854.164.7120.471.064/26/20179.6550.94156.9

Revenue growth for Facebook unsurprisingly has been very steady over the years while TZOO is not seeing much positive

Long Facebook (FB)

It’s no secret that I’ve been a big believer in Facebook and that continues to be the case. It’s fair to say that Facebook’s core product growth opportunities will start to be more limited given the number of active users and ad growth. Even there though, as Facebook starts to add more video and as offline ad dollars move online, core Facebook will continue to see significant growth. Instagram is just getting started and time spent on Whatsapp and Messenger are incredibly bullish for its future. I continue to think Facebook is one if not the best growth opportunity among the tech stocks that I follow.

Next earnings: April 26th 2017


Short Match Inc (MTCH)

I’d generally say that Match has been an impressive story in recent years and I do expect that trend to continue but in this case, I’m mostly betting that it’s current valuation means it will underperform Facebook in the short term. Match does face a tremendous amount of competition and I’m not convinced that its current valuation is justified given its growth prospects.

Next earnings: May 2nd 2017

Disclaimer: Prior to opening this trade, I am long Facebook (FB)
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Closing 1 Trade (FB & PYPL)

By: ispeculatornew
Date posted: 04.02.2017 (3:05 am) | Write a Comment

Good Sunday morning! Tomorrow morning, I will be closing out one of the 7 live trades, as I close the Long Facebook (FB) and Short Paypal (PYPL) trade that was started on January 3rd. The trade currently stands at +21.10%. Last week I wrote a deeper dive into my thoughts about Paypal on SeekingAlpha, you can see it here:

Paypal is standing on the edge of a cliff

Facebook on the other hand has been doing tremendously well and while it continues to be under fire for a few things, I do like what I’m seeing out of Facebook and will certainly write more about it soon. There’s also a decent chance that I’ll be opening a new long & short trade with Facebook and as you know, it does remain my biggest single stock position.

As is always the case, you can see my 2017 (and past years) long & short stock picks and returns here:

http://www.intelligentspeculator.net/livetrades

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