Post a CommentAh, the last week was a brutal one as one of my short positions (RAX) exploded higher which as you might have seen in my previous post, ended up being a costly trade. No real lessons to learn here, these things happens and overall, my returns so far this year have been very solid for these trades. As always, you can see my 2014 picks here:
http://www.intelligentspeculator.net/livetrades
I generally only open 1 position on these posts but I’ve been closing positions rather quickly in the recent past and saw 2 good opportunities so why not try this today?:)
You can see the numbers for both companies involved in today’s first 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 | 597.51 | 14.07 | 12.31 | 6.17 | 9.2 | 4.21 | 139.46 | 0.86 | 184.7 | 41.23 | 53.24 |
| ORCL | Oracle Corp | 41.69 | 17.58 | 13.14 | 10.27 | 0.16 | 4.04 | 9.97 | 1.13 | 7.8 | 12.09 | 19.3 |
Long Apple (AAPL)
The message here is fairly simple. I am a very strong believer and last week’s trade failure (AAPL/RAX) was not because I missed out on Apple. Not much here has changed except that there is very little news in terms of new products with WWDC only a couple of weeks away? Bad sign? Time will tell but as I’ve said over and over, even without new products, Apple is a great value at these levels.
Next earnings release: July 23rd 2014
Short Oracle (ORCL)
I am what you’d generally consider a believer in Oracle and would certainly consider it one of the blue chips to hold when looking at the tech sector. That being said, it makes little sense to me to see Oracle being traded at a comparable valuation to Apple’s. Let’s face it, they face fairly similar downside risk but Apple’s upside seems much higher making this trade extremely attractive.
Next earnings release: June 20th 2014
You can see the numbers for both companies involved in today’s first 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 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NFLX | Netflix Inc | 349.88 | 129.39 | 46.27 | -6.51 | 21.2 | 3.44 | 24.66 | 1.2 | 75.17 | 26.73 | N/A |
| P | Pandora Media Inc | 23.43 | N/A | 48.92 | -11.17 | 132.52 | 4.06 | 2.47 | 1.94 | 3.54 | N/A | N/A |
Long Netflix (NFLX)
I love Netflix as a user but I’m not as convinced about buying the stock. I do think NFLX has great management, an amazing business and has everything you’d hope for in order to remain a long term established player. It does trade at a rather high P/E which makes me hesitate but when I compare its valuation to a company like Pandora, it becomes a rather easy trade. They are trading at very similar forward P/E’s despite NFLX giving me much more confidence in its ability to deliver across all metrics.
Next earnings release: July 22nd 2014
Short Pandora (P)
I’ve generally been very negative about Pandora mainly for 2 reasons:
-it depends on other ecosystems (Apple, Google, etc)
-the competition is so fierce that pricing will always make it very challenging for Pandora to significantly improve its profitability
I remain as convinced as ever about both of those points and do think that it makes little sense for Pandora to trade at such high P/E ratios.
Next earnings release: July 24th 2014
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