The Pinch Play

chessNwine Fri Sep 17, 2010 12:56pm EST 3 Comments

One of my top follows on the twitter stream is @vcutrader. Thanks to his generosity, I have learned infinite amounts of wisdom from him over in The PPT User Notes section (“chat room,” as is referred to by the steerage class), as far as macro and microeconomic fundamental analysis is concerned. In my mind, he deserves the ultimate compliment in the finance world: Great trader, great guy.

I am following him into his long The New York Times Company ($NYT) play. Over the past few years, talk about the death of the newspaper industry is well deserved. The overwhelming majority of the daily rags have lost a battle on two fronts. First, the shift from print to free online content has eaten into their revenue stream. Beyond that, their content has become more and more out of touch with the average reader. “Pinch” Sulzberger, who inherited The New York Times, exemplifies the mindset behind the turn away from straight news on the front page, towards an ideologically driven hidden agenda on the non editorial pages.

However, Steve Jobs and Jeff Bezos may very well be the saving graces for the newspaper industry. The e-reader growth story is likely to benefit the $NYT in a way that the stock market has not yet taken into account. Looking at the daily chart, the possibility for an inverted head and shoulders bottom formation compels me to take a position here.

As usual, timing is everything. I will obey my usual 7-8% trailing stop loss on this trade, despite my belief in the fundamental thesis. Keep in mind that @vcutrader is building a long term position here, so you should ask yourself whether you are in this for a trade or an investment, should you choose to follow.

All trades are timestamped inside The PPT.

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