STX and all drive makers are on a roll with Seagate about to get the biggest pop on Monday with a well deserved Cramer mention. The p/e of STX is 2/3 of group average and PEG of .83 is almost half but they just raised guidance 10% so the run they are on should be good through $20 before gravity gives us another buying opportunity.
On a pullback, institutional money should start flowing back into this sector but with the Jan 20’s already selling at .55, I like this stock for buying now and looking to sell those calls for $1+ on Monday’s run-up. With the stock at $18.55, it’s a quick 15% if you are called away and it gives you insurance for a retest of the 200 dma of $17.75 which is likely between now and then.
Bank of Canada will almost certainly increase rates to 3.5% on Dec. 6th. With interest rates at 3.25% currently, “Monetary policy is still very accommodative,” said Carlos Leitao, chief economist at Laurentian Bank Securities in Montreal. “They have to be very cautious.” Ouch – we hate that kind of talk! This is their 3rd tightening but they are way behind our Fed and, with Europe having just raised rates, I think the Canadian companies are in for the same hell as US ones have been in all year. This is good for US stocks and bad for Canadian ones who have been enjoying the advantage of a point spread. RIMM is a Canadian company…
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Speaking of RIMM (I know, I’m obsessing but I really think they are going down!), I found out who the nut jobs are who are buying shares – RIMM! Apparently the company has bought $400M (5%) of their own stock over between 10/17 ($57.50) and 11/10 ($66), that represents 10%+ of all the shares that were purchased!
They had announced this plan on 10/11, driving the weak stock from $63 to $66.41 that day and they proceeded to shoot the whole wad as soon as bad news broke 8 days later as the stock dropped to $51, bringing it back to life at $66 again. So, in a low volume run-up after the collapse, RIMM was the “mystery buyer” who took the stock back to its 50 dma! Also, I hate to suggest such an unseemly thing, but it is entirely possible that they were bailing out some of their institutionals by raiding the company kitty.
One of my stock warning signs is unusual call depreciation and RIMM’s Jan $65 calls have gone from $8.50 on 11/22 to $5 on Friday, even though the stock is only down $2. This news was broken in Canada’s National Post on Friday so expect further deterioration next week as RIMM has no more allocation left to buy with.
There is word (rumor only) on the chat boards of a settlement involving a $250M immediate payment and $1Bn in trust pending a patent decision. If true this may be considered good for RIMM and NTP so it makes sense as the patent issue is much less intense than a prolonged court fight and it puts off RIMMs actual damages for a year or two, either way the company can continue to operate no matter the outcome (albeit with a lot less money!). If it’s true, we should know by Monday am so stay tuned…
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Something is wrong at ADM, 5% of the Mar $22.50 calls were dumped on Friday as the stock broke its 50 dma at 24, a bad sign, especially as I don’t see an obvious catalyst. Earnings are heading down in general and the stock is way up from $19 in May so Jan $22.50 puts for .40 are looking good. The $25 puts are nice too if you’re brave but I’m just looking to take a small risk on a hunch here.
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WRH and MYG are possibly heading into disaster as Samsung and LG step up to attack the US market with cheaper (and, according to European’s who use both, better) appliances. The attack will come from non-traditional sales outlets like Lowes, who signed with Samsung and HD, who signed with LG.
Think about it, where do you go first when you buy a new home, Sears or Home Depot? If you are buying a used home I think the answer is definitely Home Depot where suddenly a new Washer/Dryer/Dishwasher might seem like a good idea! I think the merger-mania run-up of WHR is sending it to an overbought level that will present a nice short in the near future.
Also interesting, for a deal that is supposed to close in February at $21 ($10.50 in cash and WHR stock that has been on fire), MYG is only trading at $18… I would certainly be poking around at this with my hedge fund!
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UNH is about to finish its PHS acquisition, I am hoping for a drop to buy into but I’m not sure when this thing will ever stop going up.
My favorite RIMM pumpers, SG Cowen, are at it now with AV, a VOIP provider. They have been at it for a couple of days now trying to get the stock above $12 saying the stock “could outperform the market by 25-40%” but so far the stock has sold off on heavy volume and looks primed for a big drop (just like RIMM!).
AHR is looking like a safe place to park some money. The company pays a 10%+ dividend and is growing nicely making commercial real estate loans. Revenues are up about 15% this year and profits should be double last year as the company gains traction in the market. Insiders were buying on the open market last week as the stock moved through its 50 dma, it is now resting on its 200 dma, preparing for another move up.
BPL (Broadband Over Power Lines) is looking like real technology and I really like penny stock (and I never like penny stocks) ABTG who is teaming up with LVLT, ED and ELNK to provide the service in NY. ABTG did a huge dilute in last year to raise $4.9M at .50 and they borrowed another $5M of which they have $2M left which may only last them until the end of the year. Bankruptcy won’t help them as they don’t really have any debt. So why do I like them, well they have the patent on some nice technology. Hey, $100 buys 1,000 shares so what the heck! In ten years, if the stock goes to $25 it will be a nice one to talk about. They do need money and may dilute down to .05 if you wait though…
On the hardware side of BPL there is TKO, who makes commercial equipment for wiring the buildings. TKO’s market cap dwarfs Ambient but so do their losses. Revenue is ramping up but SG&A is out of control at $3M per 600K in sales, in my opinion. Sales are up 200% this year and accelerating and losses may be winding down. This company also needs to raise cash fast and I think for $5, I’d rather get 50 shares of ABTG but, if one takes off, buy the other.
The reason I like this play is that some way, somehow, everyone will have broadband in 5 years the way everyone has cable. This is a great way to wire the fringes and has the added benefit of giving the utility companies both remote reading devices which save them money and a really quick way to find out where a line is down since it will look more like a node on a network to them. I think both of these companies can be gobbled up by one of their partners and they both have compelling stories to tell.
