Putting a Plan into Action

Futures are pointing to yet another lower open. Shares in China are getting hit on a daily basis and European stocks are at 3 week lows. Basic material stocks are vastly underperforming the S&P and risk appetite seems to be waning. Having said that, I don’t give a shit. Stocks are going to trade up, by hook or crook. The only question is: what sectors can I find the best return?

I see people are buying tanker stocks because of dry bulk shipping rates. Well, frankly, that’s retarded. The only reason why the shippers are doing “okay” is because record amounts of tankers are being scrapped for its metal. On top of that, coal volume is down sharply. Until the steel industry comes back, spurring a boom in the met coal stocks, I want no part of the shippers. They’re all connected.

I still like high end retail, due to its unique position away from the lower class. I own BID and JWN–and will add more on dips. As a matter of fact, being fully invested, I have but two choices with regards to my positions: add to them or buy more.

Generally speaking I cut losses at -10%. However, if I really like the idea, I will double down at -10%. In many ways, that is the crossroad for me. Other times, I will sell out of a stock when it is just 5% below my basis, specifically for names that I have little confidence in. At the moment, I am up significantly in YELP, but down slightly in MAS and GLW and flat in TDC, JWN and BID. I am down 18% in CPST– but continue to hold for superficial reasons.

At the top of my buy list is RAX, BID, ADTN, ULTA, KKD and TRIP. Also, should the market become OVERSOLD, gold and silver will jump to the top of my buy list, due to the high correlation between market bottoms and the miners. Within the space, I like AG and EXK.

Social media stocks are great, especially with Facebook set to ipo within 60 days. Understand something, that will be the grande finale of this run. It’s very possible that the market will top out with the FB ipo, which means social media stocks should be sold into the Facebook ipo. Nonetheless, I believe there is more upside in the space before they top. My favorites are YELP, TRIP, BV, BCOV and YNDX. OPEN, TZOO, CTRP and OSTK are also interesting, if only from a short squeeze point of view.

During the course of today’s trading, I am going to research some new names, perusing over the April seasonality list inside of The PPT, plainly ignoring the temporary weakness that has the ursine crowd circle jerking again.

I am going to make a presentation for the fine gentlemen/ladies who read iBankCoin. All others, particularly those of the vagrant class, will be precluded from seeing this post, as it is written in a special/patented font that cloaks my message to those of the Mezzo Cito–making it invisible to the naked eye.

My question to you is: at what price or valuation do you buy a winner?

The correct answer is: any price.

I’d love nothing more than to say “see I told you so. The fucking charts had some pentagram formation, blended with a little trapezoid humour that told me YELP was about to explode.” I don’t rely on technical analysis for any of my trades, although I know people who do it very well. I didn’t know YELP was about to explode by 50% in a week. But I knew, down to the depths of my black soul, that it was going higher.

One my best friends growing up was over for St Patrick’s day dinner and we discussed his account. At the time, believe it or not, I had him in a little VXX (friends shouldn’t let friends invest in VXX). He was eager to make money quickly, mainly due to boredom, so I told him I’d just buy up some YELP because I was absolutely positive it would trade higher at some point in 2012, just like WNR at $12, GMCR @ $25, GSVC @ $12, FTK @$1 etc. What I didn’t know is that the stock would do this, fucking nuts.

Now I haven’t sold any YELP, mainly because it’s not a question of making money anymore, but how much. The way I see it, the stock is going $40 at some point in 2012; I’ve always believed that. Should I miss a short term top, I will buy the dip. It’s that simple.

Granted, I could sell at $31 and reduce myself in a fucking frying pan to pussy sauce. Or, I can man the fuck up and say to myself “Fly, you’re better than those dicksuckers out there. All they do is watch cartoons, play video games and lose at shit. You’ve been trading in and out of stocks like a fucking lunatic fisherman in a dry pond for over a year, taking small gains and living off the dust of the earth. You can either continue this egregious lifestyle of conviction-less investing or sack up and see this one through.”

I really said all of that shit to myself.

So there you have it. You should take profits and go buy some hamburgers, or whatever the fuck you idiots eat for dinner. I, on the other hand, have deiced to leave the office, in search for greener pastures, literally, with regards to a real estate transaction of the personal sort.

Here is some of the early commentary on YELP, inside of the the “user notes” section part of The PPT.

Basic materials are getting hit again. I am leaning towards selling my RS, but want to give it a shot to get back on track. The whole point of keeping RS is to have exposure to basic materials. Although weak, the industry tends to go gangbusters when things in China are going well. However, as of late, the chinese stock market has been getting kicked in the noodles.

I suspect the market is going to trade lower, just a smidge, in order to lure a fresh batch of bears into the snare. Rest assured, similar to past traps, this decline will only result in more pain for the ursine types.

Near the top of my buy list is BID, ahead of the spring auction season. “The Fly” is all about high end luxury items, which is why he made money in TIF while many of you lost money in MCD. The point being, a great many of you eat, rather sloppily, at MCD or WEN, clad in CROX shoes and Lee jeans. Frankly, that’s disgusting, on many levels.

It’s too early to make any well informed predictions. But thus far, the market decline looks benign– perhaps a fine occasion to capitulate on shorts and get long before the tide rises again.

UPDATE: I sold out of RS.

No, I didn’t sell any YELP today; I bought more! The stock will likely trade lower tomorrow, following today’s nirvana. But it accomplished something significant today, aside from all-time high share price: visibility. I gather the lot of you are still using rotary phones and watching black and white televisions with antennas on top; but Yelp is changing the way people pick places to eat. It’s the Zagat killer, social media at its best.

Aside from YELP, BID, RS and JWN, my other positions traded lower, as the market weakened into the bell. That’s all right. We’re overdue a correction and the TVIX needs some love. I am glad to have sold EXK; but chagrined that I bought MAS near the highs of the day. It’s a half position, so I will have no reservations about averaging in lower–should the opportunity present itself.

CPST is such a piece of offal. But I am interested to see how the story plays out, which is why I haven’t sold any shares. If I sold today, my losses would be around 18% and could be easily absorbed and offset with the gains I am enjoying elsewhere. Nevertheless, stubbornly, I still hold.

For the day, I advanced by 1.7%, firmly putting myself at annual and all-time highs, indeud.

I am closing out Q1 up about 20%. I’ve told you, over and over, about my obsession with starting the year with gains. Well, I’ve worked about 2 months this quarter and find myself with more than 4x my 2011 returns.

After revving up the engines in late December, I decided to take profits in early February, chilled in cash; now I’m speeding again inside of my fucking space ship–abducting fuckers from 0hio and tossing them into outerspace.  I have a large amount of YELP ripping chest hairs to the upside. A more humble man than I would be taking profits here, preserving his coin for later use.

“NOW IS NOT THE TIME TO BE A PUSSY.”

I don’t give a shit that the stock is up 20% since my initial position. I bought more today and will sell it all when my favorite urinal shadow tells me to.

I bought some MAS today, due to my desire to have housing exposure. Those fuckers make kitchen cabinets, things of that nature. Since Mrs. Fly has a $100k kitchen renovation in mind, I see it as a good hedge against her superfluities. Also, I added to GLW. There is some shit brewing with GLW. You fuckers just don’t know it yet.

I sold out of EXK because I don’t like precious metals when the market is overheating.

Back in 1999, I was 23 making $250,000 per month, long internet stocks, first to show because my brain works better than others. Fast forward 13 years, I’m doing the same ol’ shit.

http://www.youtube.com/watch?v=9kpqCzTAF70

I added to YELP and GLW and started a new position in MAS. Get the fuck out of my way.

I hate buying stocks that have already made big moves to the upside. More often than not, however, the stocks near new highs continue to make new highs. Momentum begets momentum. Things happen for a reason. People are single at 40 for a reason, just like stocks underperform for a reason. Most of the time, they are shit. However, on occasion, a keen eye can find the proverbial “diamond in the rough” and buy the next one to go early.

I’ve compiled a list of stocks, with market caps above $5 billion, that are up less than 3% year to date.

Let’s review them, shall we?

EA is interesting down here. I know video game sales have been sluggish. But EA was supposed to be killing it on the mobile side too. That is definitely a stock worth monitoring. I don’t have much interest in any of those names, especially chinese burritos, coal, utilities and gold. Although I think gold goes higher, the fucking mining stocks have not correlated well with the market over the past 12 months. Yeah, I see a rail on there too, likely weak due to coal. MCD is at the bottom, busy poisoning kids with their fucking “Happy Meals.” No interest.

Next.

This list is littered with defensive names. None of these stocks are doing terrible, year to date, just lackluster. Most of them pay big dividends, so that makes up for some of the underperformance.  My favorites on that list are DPS, GOOG and SWN. I like beverages in a strong economy. There are strong correlations between beverage consumption and strong national GDP. GOOG is GOOG and SWN will rip tits if natural gas bottoms.

Last but not least.

MCHP, SNDK, TCK and JCP are interesting. SNDK is enjoying a tailwind due to weaker Yen. Plus, flash memory is booming. MCHP is your classic semiconductor company that tends to do well under the radar, when semis are strong. JCP is interesting with the Apple guy leading the company. And TCK will run if basic materials catch a bid. For the most part, basic materials have been laggards, mostly thanks to coal. Should coal bottom, particularly met coal prices, I like JOY and WLT.

Bottom line: In the big cap space, there aren’t a lot of names on sale. In order to get real bargains, I suspect there is a lot more to choose from in the smaller cap space.

UPDATE: I sold out of EXK

One of the edicts set forth by the powers that be at iBankCoin, during the exquisite development of the second iteration of The PPT (BEHOLD the excellency of my prose!) was to establish an evolved version of the Overall Hybrid Score, aka the mean reversion element of the algorithm that flags general market overbought and oversold conditions. Throughout the years, you’ve witnessed these signals with perfect clarity time the market with sublime mathematical precision. Upon the launch of part two of my grande experiment in mathematical precision, three new sets of general algorithms will be added, all to conform to time.

Understand something, price is not enough. In order to properly gauge the market, with all of its eccentricities, one must account for time–because things change, correlations dislocate and reattach, scattered over an undetermined period of time. So, we’ve created 3 month, 6 month and 12 month algorithms to go along with the current 36 month (anything longer than 36 months is mostly irrelevant).

During this period of unprecedented appreciation, The PPT has done well. As a matter of fact, our good friend Ragin’ Cajun published a study towards the end of 2011 highlighting the astounding advantages of trading in and out of leveraged ETF’s– using the overbought/oversold signals. The most difficult part of using mean reversion, in an irrational market, is there are few opportunities to profit from the downside. Moreover, over the past three months, there have been an unprecedented amount of overbought signals registered in The PPT, which only further demanded malleability in the way the algorithm was calculated. It is clear to me, a score of 3.10 no longer represents grave danger, as it once did, just 6 months ago. Nevertheless, over the last 36 months, had you adhered to the glory that is The PPT, you did exceptionally well.

HYBRID SCORE CORRELATING WITH THE S&P 500

Using the OS signals made you money 82% of the time, over 33 separate instances. The OB signals, prior to this recent bout of foam mouthed bullishness, presented a much greater level of accuracy. Nonetheless, at 64% accuracy, within 7 days of a signal, in such a trending market as this one, up over 100% in 3 years, I declare it is more than an edge, but an advantage.

I was up another 1.86% today, “Gretzky Housing” within 1% of all-time highs. Volatility is compressing for a reason: we’re heading for new all-time motherufucking highs. You bowling ball shiners can bet against me all you want. I told you before and I’ll tell you again: it’s a losing proposition.

“The Fly” weazens those who stand in his way. Aggressively with savage determination, he kicks people down manholes and runs over skeletons in his 80’s style stretch limo.

Into the bell, I puffed, puffed, puffed, long, steam rolling, egregious amounts of YELP, BID, TDC, EXK, GLW, JWN, and several others.