Post a CommentIt’s time to trade again!! After skipping a couple of weeks because I had all my long & short fund invested, I then went a few weeks without opening new trades. Being busy, a lack of opportunities and the earnings season all were partially responsible for that but things have been going well and with today’s MSFT/AOL trade being closed, I now only have 3 live trades and am ready to get at it. Just as a reminder, you can see those trades here:
http://www.intelligentspeculator.net/livetrades
You can see the numbers for both companies involved in today’s trade here:
| Ticker | Name | Price | PE Ratio | PE Next Year | Return YTD | Sales Growth | Analyst rating | Book Value | Beta | Revenue/Share | Sales 5Y Avg Growth | EPS 5Y Avg Growth |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AAPL | Apple Inc | 587.99 | 14.15 | 12.42 | 6.8 | 9.2 | 4.22 | 139.46 | 0.89 | 184.7 | 41.23 | 53.24 |
| RAX | Rackspace Hosting Inc | 26.65 | 44.85 | 29.7 | -31.23 | 17.23 | 3.76 | 7.48 | 1.02 | 11.08 | 23.45 | 26.1 |
Long Apple (AAPL)
It’s fairly simple. I’m a BIG believer in Apple. It’s the only “long term speculative pick” that I made last year, was sitting at the #1 position in my 2014 tech stock power rankings and I simply think the potential upside vs downside risk is the best value you can find right now. It is trading at a P/E of 14 and despite its size continues to show decent growth. The company arguably has the top ecosystem play in the world in what I am convinced will be a world dominated by these ecosystems. I will soon be doing a much more detailed post with an “updated” view of Apple but it’s safe to say that I remain a big time believer in the stock.
Next earnings release: July 23rd 2014
Short Rackspace (RAX)
I usually stay very far away from stocks that are about to report earnings. I simply feel like it’s playing with fire and I’d rather not get involved. I’m making an exception here for a few reasons but the main one is the fact that I think this is one of the most overvalued stocks in my universe. It is trading at very high P/E’s based off of the (very true) assumption that “cloud” based stocks will see incredible growth in revenues in the coming years. I don’t argue that point but I do think that the competition is incredibly fierce and that will drive down margins and put a lot of pressure on non-ecosystem plays that cannot afford to operate at break-even (or even losing) businesses for several years in order to gain market share.
Just look at this chart and I personally think it’ll get a whole lot worse:
RAX Revenue (Quarterly YoY Growth) data by YCharts
Next earnings release: May 12th 2014
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RAX is announcing earnings after the close.
Yes, exactly as I mentioned in the post.