Aside from positioning into takeover plays, the first half of 2011 should be about “Growth at a Reasonable Price” (GARP). To accomplish this task, you can sift through thousands of ticker symbols, like a babboon’s ass on a needle, or you can set up screens, like a gentleman. Either way, you’re going to want to look for stocks with the following criteria:
Avg. volume over 500k. Trading is hard enough as it is. You do not need the headache of fucked up liquidity traps.
ROE over 10%
Quarterly Revenue Growth over 20%. Most websites use yoy comparisons. I think that’s flawed. Inside The PPT, I use the last two quarters versus the same period one year ago.
Market Cap over 250 mill. Anything less is simply gambling.
And, finally, I use rudimentary fundamental analysis by grading PEG, Debt/Eq, p/b, p/s and profit margin metrics, all done using my fucking toolbox. If you do these things correctly, you will find a lot of bullshit Chinese names. Scratch those fuckers out, for they are mostly fraudulent. After that, you will have a solid list of companies, all worth buying based on fundamentals. Now comes the hard part.
When to buy?
Well, you have two options:
1. You can dollar cost average into focus names, sort of like I did with FTK.
2. Or, you can keep them on watchlists and buy them when the fucking trading robots throw cocaine on them and snort them into their chambers.
As for me, I will be putting a portfolio together for 2011. Aside from the trading that I do, day in and day out, I need a little bit of normalcy, especially since my pie is getting bigger. I can’t keep sloshing in and out of equities like this, else I will die of a panic induced stroke by the age of 35.
What sort of names will this screen produce?
Naturally, the list is constantly changing, as fundamentals improve and/or deteriorate. But, just to get an idea, had you went about your business using this screen, in 2010, you would be long names like PCLN, OPEN, APKT, AAPL and a slew of fucked up education stocks (COCO, ESI, CECO). Be careful not to get sucked into “value traps.” The education stocks were classic value traps in 2010. Typically, smart money foresees danger before the unwashed. If a stock or sector is trading at ridiculously cheap valuations, there is a reason. In this case, Congress ass-raped the criminal enterprises who offer fucked up education for exorbitant fees, rightfully so.
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An early opening of my Christmas stocking gave me a large gift in a small package – ATPG. Thank you Senor Santa.
Fly, what’s your take on Cisco as a GARP play? Is smart money dumping it in favor of CIEN, JNPR, HPQ? I know you owned CIEN recently and made off like a bandit. Thanks.
CSCO is on the 2011 list; but not at the top. It might make it due to its mega cap status.
I always assume that you are posting from somewhere in the future, so, wherever you are right now, 2011, 2012, what’s MVIS doing? Does every cell phone have a MVIS projector in it? Is it the FTK or 2011?
I am afraid not
Thanks Monseiur LeFly!
ROFL – “babboon’s ass on a needle”
The portfolio? Posted? Where?
“Anything less is simply gambling.”
Tough statement when I consider going to the grocer and buying a loaf of bread a gamble.
Thanks Dr. Best post of the year.
I’m looking at industrials – heavy truck / tractor components
And military tactical / man portable equipment. No pie in the sky LLL shit for me
LLL: 80 before 60. Gentleman’s bet?
How about 70 before 80?
It’s 70 now, Colonel…
Doh!
Restructured my STI position by taking a portion of the chewed up profits (100% gain overnight) and stuck a piece under the table on some OTM options for $0.05. Hope it sticks.
I decided to buy some CECO here for a breakout gamble.
what’s the bid on those 5 cent options? 0 cents?
and if the mark goes up 100% to 10 cents the bid will be 5 cents. so you still lose
Actually the bid/ask on the $35 Jan calls was .03 x .05 so I technically won’t lose everything but I am willing to lose the whole position. The fair low-end buyout price I’ve heard is $43 so I bought a couple hundred dollars of the calls at $0.05 with my profits so if they hit they will be worth at least $32k. Outsized risk/reward with the house’s money.
>>Avg. volume over 500k. Trading is hard enough as it is. You do not need the headache of fucked up liquidity traps. Market Cap over 250 mill. Anything less is simply gambling.<<
Hey, no offense, Fly, but these two parameters are ridiculous for anyone running less than several hundred million bucks. The best advantage the smaller investor has over a billion-dollar+ institution is the ability to buy a stock that the big guy would LOVE to buy but can't, either because it's too small to move the needle or not liquid enough that he can buy it "in size" without driving the price through the roof.
Instead of the above parameters, I'd say "the smaller the GARP company and the fewer covering analysts the better" (as that's where the most pricing inefficiency is likely to be) as long as– and this is important– the company has a major league auditor.
Logical thought
You are a piker; therefore you think small. Take your fucking small shit to the ghetto, not here
Sure, logic has a place in the decision making process but, I can’t agree that smaller + fewer = better if watched over by a major league auditor. That vague description, on its surface means nothing and if you mean the bigs like Ernst & Young I suggest you write a piece on who audited the auditors for Lehman, etc.
For example, my positions in VER and CEX today. WAAAY too small for Fly. But it looked good in my tiny little account. Even the General Sherman tree started small.
TITN was my winner this year. From $9.
You do not care, so please – skip over this comment.
I care – congrats.
In the spirit of Christmas, I’m sorry for harrassing you and your Dow 9,000 call this summer.
Merry Christmas.
Hahaha … way to rub it in!
LOL – I actually meant that in a nice way.
Ok … sure, if you say so
Thanks Bullshit…er, I mean Bullish. (joking!)
King’s to you for calling my error. But in all fairness to myself, I don’t think my number was off. Just my time frame.
POMO was the game changer for shorts. Bernanke’s desperation. Stand tall and proud, Mr president. The slope of hope will become the Wall of worry again soon…
Speaking of which, any confirmed suicides over on the SOH website yet?
You’re right, my funky friend.
You do what you can with what you’ve got.
Sometimes you get the POMO-hammer.
If my Aunt had balls, I’d call her my Uncle.
Not only does your aunt have balls, but your mother has jungle snake in ‘her’ pants.
I have no idea what that means.
SATC is BTFO
Wow – Merry Fucking Christmas.
Is the Fly ever short???????
PLENTY!!!! have you not seen the VXX, FAZ, TZA calls? They are ledgendary.
In this case, Congress ass-raped the criminal enterprises who offer fucked up education for exorbitant fees, rightfully so.
Oh Monsieur! C’est dommage!
________
“In this case, Congress ass-raped the criminal enterprises who offer fucked up education for exorbitant fees, rightfully so.”
_______
Oh Monsieur! C’est dommage!
____
Why is my comment “awaiting moderation?”
_______
The moderator is off taking a dump?
Because dommage is such a perverted sex move that it needed a quick check for context.
FLY – Bought some MOTR around $20.55 today. Think I got in at a good price. Merry Christmas.
Good analysis of course, like always…but what pops the commodity bubble Fly? I know, I just have to learn that on my own….Merry Christmas.
When inflation breaks the Fed’s stated goal of 2% and they start to apply the breaks … but tapping the breaks doesn’t work and The Bernanke applies agressive rate increases then you’ll see gold selloff which will be the canary in the coal mine.
I disagree. High interest rates will increase gold as its use in black-market deals away from IMF manipulation will become more common.
Check the history books … As inflation soars gold will continue to rise even as the fed raises rates but once rates peaked in 1980 you’ll find that gold had already reversed course anticipating the demise of inflation and was cut more than in half in about 1 year from the time we saw a peak in rates … the entire process (gold from $150 to $850 and rates to 20%) took place over about four years.
When the world population substantially declines. Commodities are limited, and people keep using them. Bet on them to outperfom everything over the course of your lifetime.
My Exception: Polywell fusion power would change this.
First oil and uranium would drop, then the other metals as asteroid mining began.
dude it’s all about unobtainium..
This is fantastic Fly! Thank you so much for teaching us all.
Everybody is looking around to see what is in a bubble right now. It’s got to be something we are not even considering at this point. Although I don’t know what the hell silver is good for anymore.
Silver’s used in a zillion industrial applications. It’s the most conductive metal, for one thing.
_______
You are right,
“”Conductor materials
Of the metals commonly used for conductors, copper has a high conductivity. Silver is more conductive, but due to cost it is not practical in most cases. However, it is used in specialized equipment, such as satellites, and as a thin plating to mitigate skin effect losses at high frequencies. Because of its ease of connection by soldering or clamping, copper is still the most common choice for most light-gauge wires.””
The first house I moved into (built in 1915) was wired with silver.
Oil.
Everyone is jumping on the oil bandwagon because inventories are “down”. Well inventories always go down this time of year as companies pull shit out of inventory to avoid paying tax on appreciating stocks.
Oh, but the dollar is weak so that’s why oil is up. Nope, compared to one year ago the dollar is about 8% stronger vs. the Euro.
But the GOM moratorium has decreased US production so that’s the reason. Again, wrong answer. Production in the US is up on average 2.5% per week when compared to YoY levels.
Thus here is your bubble. It will pop around 2nd week of Jan. Maybe.
I sold all of my COP this morning.
Let’s see: Sentiment 78% bullish; VXX at a low; the hot money stocks have topped;
market UP 10 of last 11 days; market up 6% so far in December; shit stocks are
running; people are buying stuff at high prices for their IRA’s.
The prudent man already SITS in maximum cash.
I smell an underinvested bull here.
Or in Orko Silver OK.
But USA TODAY said its time for the average joe to get in! riiiiiight…..
FLY! I’m following you into the Abyss!
Today I picked up some SOL, TTWO and MOTR!
I missed out on ATPG today!
Hah! The V.King following the Fly into the abyss…
Major indices up 25-30% inside of one reporting quarter and up 6% this month and 2% in a week.
This is not the abyss, young man. This is a sheer cliff on K2…
The abyss will have you in your fallout shelter. You will be way too scared to come out.
Best post of the year sir. Thank you.
At my barber shop they always tell you, “Best one today!” , after every haircut. They even have it on their business cards.
Fly,
Your calls on MOTR is excellent. I am in the industry and it is a M&A candidate.
Not sure, if this one makes sense for your aggressive fund. But, ROVI is one of “cloud” favorites. Not sure what the PPV G-d’s would think though 🙂
Happy Holidays,
Scott
Sorry make that PPT. typo.
Thank you for the good writeup. It actually was once a amusement account it. Glance complex to far introduced agreeable from you! However, how could we keep in touch?
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