Tracking The IBD 50

I love looking at data, discovering new trends, and finding hidden cause and effect relationships.  That is probably why I like spending hours analyzing computer event and security logs.   I also tend to do the same thing researching the stock market, especially when I notice a dramatic change.  In this case, I noticed a lot of new stocks listed on the weekly IBD 50 list.  So, I started something that I have been meaning to do for quite some time but never really got around to it.  Until now.

Tracking the IBD 50 list.

We all know the only state the market stays in is a constant state of change.  Prices fluctuate every day, every minute.  And it stands to reason that any watch list will do the same, though not necessarily on a daily basis.  My “gut” was telling me that the IBD50 list had been fairly stable and now quite a few new members had joined the list.  Conversely, this meant quite a few had fallen off of the list.  Of course I wanted to see the evidence for myself.  So I sat down and started plotting out the last two months or so of reports.

This is what I came up with.

Listed below is the stock symbol, IBD’s Group Classification, and the week the stock appeared / or not on the list.  If it appeared on the list the number is the ranking IBD gave it from 1 – 50 with 1 being the best of the best.  If it did not appear on the list then that week is left blank.

Now I have not had a chance, nor enough back testing evidence, to find out if these changes are due to quarterly reports, market conditions, changes in market cycles, investor/consumer sentiment, hype, fear, or some combination of all of the above.   But at least I seem to have enough proof that my gut was right.

Breaking it down into adds, drops, returns (on,off,back on again), and stay(remains on the list each and every week) and by sectors we get the following.  This was an attempt to see which sectors are strong and remain on the list, weak and dropping off, and gaining by being added to the list.

I’ll be tracking this further as time goes by and reposting any additional insights but I thought I would get it out there for those of you who might be interested.

Advertisements

I Can’t Complain

. . . but sometimes I still do.

–   Joe Walsh

Why do people complain even when things are going well?  Is it because of what could have been?   Is it because they feel that they have missed out on something even better.

“What could have been?”

In regards to investing, most people have rules by which we use to govern when to buy and when to sell.

Sometimes these rules, designed to protect us, or rather our capital / profits, can be seen as preventing us from earning even greater returns.

Some personal examples from the past month or so for me are . . .

OLED:

  • Bought 200 shares in April at $81.90.
  • Soon after OLED went on a nice 10% run (~$1800) but leveled off the week before earnings.
  • Happy with my quick profit, I sold 100 shares.  Still up ~ $900.00
  • But then I started thinking about all the “what if” scenarios around earnings.
  • Long story short, I bought a May 19 $95 call for $2.70 and sold an $85 put to finance it.
  • The stock reported record blow-out earnings and revisions and jumped 22%.
  • My remaining equity position made an additional $1900.
  • My out of the money call ~$900. Oh and the premium for the put brought that up to ~ $1200.
  • Yes, there was that voice saying I should have just kept my original investment.  Even though I was up a good $3000.

Greed is a terrible emotion.

EA:

  • I actually liked both EA and ATVI but EA was reporting after ATVI and had really good (cheap) options.  So I bought 3 May 12 $96 calls of EA before ATVI reported for $1.8 each.
  • Basically nothing happened.  The stock didn’t move much at all as a result of ATVI’s earnings.
  • So I sold 2 of the 3 for a very, very measly profit right before EA earnings report.
  • The next day those calls were worth somewhat north of $1100 each.
  • Who knew EA was going to pop 12% on earnings.
  • Certainly not the market.  They had options priced in for less than half that amount of a move.
  • Again, that little voice in the back of my head gave a very vocal 2200 cough.
  • Even though I was in the money by nearly another $1000 or so.

This week presents another “alternative” like minded play on earnings.  Similar to EA and ATVI.

Not that I am predicting a double digit return but the price is right.  IMHO.

Home Depot (HD) reports on the 16th.

Lowes (LOW) reports on the 24th.

The retail sector has taken a beating lately thanks to the likes of Macy’s and other big name brick and mortar retailers.  As a result LOW stock has fallen along with the sector.  HD has actually held up quite well.

One could very easily be tempted to buy HD before earnings because they are more directly related to the housing industry which has experienced remarkable strength lately.  LOW falls into this same category.

So even though they are “retail” companies.  They both play to a fairly strong housing sector.

Why am I looking at LOW instead of HD.  Because their weekly option premiums and volatility are significantly lower than that of HD because HD reports this week and LOW does not.  If HD has a really strong quarterly report and forward looking estimate, the market could very easily drive up the price of LOW before they report a week later.

Indeed, if one looks at the numbers, the market is already pricing in the moves for each companies reports.

HD reports on the 16th and options are reasonably priced with the market pricing in approximately a 3.3% price move based on May 19th expiration date.

LOW reports a week later on the 24th and options are even more reasonably priced with an approximate 2.3% price move for this weeks May  19th expiration.

But all those numbers for LOW’s more than double for the “after” report expiration date for May 26th.

What do you think?

Would you invest in both or play one off of the other?

Financial Independence !!!

Financial independence has always been a goal of mine. It is the primary reason I invest in the stock market.

Over the years I have developed and refined my trading style from investing in standard mutual funds, to investing in individual stocks to recently, trading options.

Thanks to Oracle, Adobe, Darden, Western Digital and Amazon, the month of March was a very good month for me on the option front.

However, that is not the reason I can claim financial independence.

Last night I hit the jackpot!

Ironic, after all these years of working like a dog, scraping and saving and investing to eventually retire comfortably and all I had to do was win the lottery.

YAY!

But don’t worry, I will still keep blogging about the stock market and finances. But don’t be surprised if I throw in a couple posts about some exotic vacation spot from time to time.

My biggest worry now is how to properly set up trusts and funds for myself and my family. I never thought I would do this but now I guess I will also start looking for a financial management advisor and or estate lawyer.

It’s a nice problem to have.

Oh, and no I have not told my boss yet.  Shhhh . . .

I’m going to wait until the check clears to do that.

Until next time.

Trade well my friends.

Cheers!

Math

 

24game-card
Can You Figure Out The Answer?

 

My youngest son competed in a 5th grade challenge 24 tournament today.

What’s 24?

24 is a math game which involves a deck of cards each showing four numbers. When presented with a card, players strive to be the first to combine the four numbers to make 24 using only addition, subtraction, multiplication, or division. Many cards have more than one solution.

The 24 Game was developed in 1988 by Robert Sun to provide students with a fun way to discover patterns among numbers.

“The essence of math is patterns. What’s important in mathematics is not what a number ‘means’ but how it can connect with other numbers. Get good at math and you will have the skills to understand how our universe works.”

The challenge tournament uses cards with only double digit numbers.  It’s even more challenging than the standard game of single digit number cards.

I think this is a great game.  It is competitive.  I love competition.  It shows there is more than one way to approach a problem and often more than one correct answer.  And it gets kids use to recognizing patterns and in my opinion “thinking outside the box”.

BTW, my son, and his schools team of eight, came in third.  They represented the school very well.  Out of a field of thirty two contestants, he and three of his teammates made it into the “sweet sixteen” semifinals.

Next year, in middle school, it gets even harder with fractions and decimals instead of just whole numbers.

You can find out more about 24 here.

When it comes to investing, math plays a vital role.

 

From:

  • Calculating Costs and Rates of Returns.
  • To figuring out how well managed a company is by calculating Debt to Equity Ratios, Investment Returns or how easily they turn Sales into Profits.
  • To more advanced Probability and Statistics, Volatility, Decay and Quant Analysis.

 

In the good ol’ days, floor traders had to be able to run all sorts of high level equations and analysis in their heads to determine if a trade was worth the risk or potential reward.  And they had to be able to do this in a matter of seconds while actively trading on the floor.

Now much of that sort of stuff is done via high frequency trading.  And those who happen to be good at developing new and improved algorithms to analyze data and patterns are the ones getting paid the big bucks to transpose it into a real time high frequency programs.

For most of us we may not need to, or want to, be able to do real sophisticated algorithms in our heads, but I think anybody who invests needs to be able to do the basics and understand how the numbers, ratios and results affect their investments.

Realizing that this next question could potentially mean different things to different types of people, investments and investment styles . . .

When it comes to investing, what do you think are the most important math and analysis skills to have?

EA vs ATVI and Options

A gaming colleague of mine at work asked me this question the other day.
Which is the better stock, EA or ATVI?

He is a gamer.  Not and investor.  But that does not prevent him from asking very interesting questions.

Gaming wise, I like many of the products both companies have.  Both are readily expanding their online and mobile business and EA has been developing more and more eSports related opportunities than ATVI.  IMHO, eSports gaming and competition is going to be big business.  EA also has the Star Wars branded games that ATVI does not.

Value and management wise, I think EA is better.

Chart wise, I find both intriguing.  ATVI could be a good reversal candidate.

atvi

EA has shown better strength and is in the process of staging a breakout after a consolidation since last October.  This breakout could very well be in anticipation of earning.  EA reports January 31 AMC.  ATVI reports February 9 AMC.

ea

Option wise, I like ATVI better.  If EA reports well, there is not only more time with the February 17 options but also a lot more interest which could drive up ATVI before they report.

What do you, think?  EA or ATVI?

OPTION Update:

Since this is the end of the month and I am most likely going to wait and see what EA does, here is my Option activity and accounting for the Month of January.

Stock Cost Sold Gain/Loss
GOOGL 410 756-102.5 243.5
MSFT 336 456 120
MS 105 180 75
DIS 306 TBD TBD
PROFIT / LOSS 438.5

My biggest mistake (I actually have two) was I held on to one of my four call options on GOOGL through earnings.    I was really on the fence regarding Google but when it started make its move I bought four to take advantage of the pre report hype.   Very much a buy the rumor sell the news strategy.   I have come to use this strategy quite a bit during earnings season.

Of the two, my confidence level was good only for MSFT.  I for one see the growth of their AZURE cloud solutions on a daily basis.  So I let MSFT ride through earnings and sold all but 1 of GOOGL (just in case if I was wrong).

That lonely call expired worthless.

MS I bought when it hit the lower Bollinger band support strictly for the bounce.

My second mistake (sort-of) was I a bit too quick on the trigger closing out MSFT when it dipped early morning which made me miss out on some later gains.  But hey.  A profit is a profit and I can’t complain. . . much.

I’m still holding the February 17 DIS 110 Call Options.

Until next time Happy Trading.