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Friday, August 12, 2005

Shorting Baidu.com (BIDU)

Reuters (via Briefing.com) about Baidu.com (BIDU):
Reuters reports that short sellers are licking their chops over Baidu.com Inc. with the stock still more than three times its initial public offering price even after ending down everyday but one since its spectacular debut. But nearly a week after the IPO, finding shares of the Chinese Web search engine to borrow and sell short is proving a major challenge, and those that are available command a hefty fee. "It's very hard to get," said one short-seller, who spoke on a condition of anonymity. He said he'd been trying to borrow the shares since they began their rocket-ship ride to $153.98 on Nasdaq on Aug. 5, their first day of trading.

Another trader who takes both long and short positions in stocks said that lending desks he's dealt with have told him that Baidu shares would be available to borrow -- but at an annualized interest rate of more than 50 percent.

Thursday, August 11, 2005

Update: Today's Earnings: NVDA, DELL, CREE, DWA

Update (August 11, 2005 4:03 PM):
DELL reports gross margin 18.6% vs 18.5% expectation. Trading down 4%.

Update (August 11, 2005 4:09 PM):
CREE EPS $0.29 vs $0.27 Reuters consensus; revenues $98.9 mln vs $99.59 mln Reuters consensus
CREE sees next quarter EPS $0.22-0.24 vs $0.29 Reuters consensus, revenues $101-104 mln vs $106.56 mln Reuters consensus
CREE trading down 5%.

Update (August 11, 2005 4:17 PM):
CREE issues guides for Q1, sees EPS of $0.27-0.29 vs. $0.29 consensus; sees Q1 revenues of $101-104 mln vs. $106.56 mln consensus.

Update (August 11, 2005 4:21 PM):
DELL reports EPS of $0.38 per share, in-line; revenues $13.43 bln vs the $13.71 bln consensus. Operating margin 8.7% vs 8.8 expectation; issues downside guidance for Q3, sees EPS of $0.39-0.41 vs. $0.41 consensus; sees Q3 revs of $14.1-14.5 bln vs. 14.63 bln consensus.
DELL -7%.

Update (August 11, 2005 4:24 PM):
NVDA $0.41 vs $0.34 consensus; revenues $575 mln vs $585.83 mln consensus.
NVDA reports gross margin 37.8% vs 36.5-37% company guidance. Trading up 1%.

Update (August 11, 2005 4:27 PM):
NVDA -1%. Still waiting for guidance, this should give the final direction. DELL is taking down the whole market, QQQQ -0.6% in after-hours.

Update (August 11, 2005 4:56 PM):
NVDA conference call about to begin. Yahoo! Finance: NVIDIA Corporation Earnings Conference Call (click to listen live audio stream).

Update (August 11, 2005 5:00 PM):
NVDA shares at $27.76 (-1.73%) just before the conference call meeting.

Update (August 11, 2005 5:20 PM):
NVDA trading at $29.58 (+4.7%) after giving outlook.
DWA reports EPS of -$0.06, revenues $35.4M vs $24.5M consensus, gives EPS guidance of $0.80-$0.90 vs $0.81 consensus. Shares trading up about 2%.

See also:
Today's Earnings: NVDA, DELL, CREE, DWA

Beauty stocks at bargain prices: Avon (AVP)

Beauty stocks at bargain prices
MSN Money
By Michael Brush

8/10/2005
Problems have blemished the looks of cosmetics giants Avon and Estee Lauder. But their shares might prove attractive at reduced prices.

Sales at Avon Products (AVP, news, msgs) -- best known for its "ladies" going door-to-door -- were well below expectations last quarter in Europe, Russia and China. Its U.S. sales were down 6%.

The nastiest surprise for Avon shareholders last quarter came from China, where Avon sells beauty products through boutiques and department stores because the government -- until recently -- had a ban on door-to-door sales.

But their fears are misplaced, says Sophia Collier, a portfolio manager whose Citizens Value Fund (MYPVX) has been buying shares in the recent sell-off. "This is a little early to start saying China is not working."

One thing that will help: Avon remains the only company allowed to sell cosmetics door-to-door. That's just one reason Avon is about to see a return to rapid, yet sustainable, growth in China. The market could eventually be worth $1 billion in annual sales, the company says. Avon had $220 million worth of sales in China last year.

With this column, I'll add Avon to my Company Focus stock-pick portfolio for tracking, and we'll see how it does from here.
I'll add Avon's chart to this story:




Read further:
MSN Money: Beauty stocks at bargain prices

Today's Earnings: NVDA, DELL, CREE, DWA

NVIDIA Corporation (NVDA)

EPS estimate:
current quarter $0.34 ($0.30-$0.36)
next quarter $0.33 ($0.26-$0.37)

Revenue estimate:
current quarter $585.69M ($555.00M-$600.00M)
next quarter $593.84M ($549.75M-$636.50M)

Briefing.com about Nvidia:
to keep sellers at bay, we think NVDA needs to hit the mark on Q2 expectations and provide guidance that doesn't allow for any potential downside relative to current consensus estimates for Q3 and the full year
NVDA earnings have a major impact on the price of the shares. So, you might expect at least 10% move on the financial data. I see NVDA more likely going down on the results. NVDA has made a great rally since the last report and there is not much room to go up. Markets have turned down lately, so investors might not forgive if Nvidia misses earnings or gives a down-guidance.

Other interesting companies announcing their results today:

Dell, Inc. (DELL)

EPS estimate:
current quarter $0.38
next quarter $0.41

Revenue estimate:
current quarter $13.71B
next quarter $14.63B

Although, Dell is a large-cap (market cap 95.32B) company, it's also easily able to make 5% moves.

Cree Inc. (CREE)

At first, notice the 16.80% of short interest. CREE is another big mover, can make at least 10% moves.

DreamWorks Animation SKG, Inc. (DWA)

EPS estimate:
current quarter $-0.07
next quarter $-0.02

Revenue estimate:
current quarter $27.68M
next quarter $32.34M

DreamWorks' life hasn't been easy, just 4 months ago it was trading above $40, now only at $24. There is considerably big possibility that DWA also makes a reasonable move on the earnings results.

So, don't forget to keep these companies on your watchlist today after market close.

Investors Intelligence Bull vs Bears

Roberto's NasdaqTrader:
Bulls 59.1%
Bears 19.3%

Is that a major warning sign or what?
I agree, QQQQ has already come down to $39 from $40, but the Bulls/Bears ratio is still very high, so is implied volatility. I wouldn't be surprised to see QQQQ trading at $38 soon.

See also:
Strange options prices

Stocks to Watch: BCON

BCON is currently trading at $2.88 (+19.5%). $2.98 and $3.05 are signifficant levels, first is yesterday's open price and the other is yesterday's highest and tuesday's close. Today's highest: $2.97.

Large-Cap Stocks to Watch

Morningstar highlights some large-cap stocks that are selling at a discount in their opinion:
We began by screening for stocks that are part of the Morningstar Large-Cap Index. Next, we looked for companies that have consistently increased both revenues and earnings per share over the past several years. Finally, we added quality screens for return on equity and financial health.
They menioned the following companies:
3M Company (MMM)
Avon (AVP)
Johnson & Johnson (JNJ)
Paccar (PCAR)
Sysco (SYY)

Read further:
Morningstar.com: Large-Cap Stocks to Watch

Wednesday, August 10, 2005

Stocks to Watch: CMED

China Medical Tech (CMED), having it's first trading day, is trading at intra-day support at $17. Watch this level carefully. If CMED shares bounce off or break this level, it's a trading possibility.

Positioning for fashion: BEBE

Positioning for fashion
Reuters.com

10 Aug 2005
Bebe stores (BEBE) has been repositioning itself at a slightly higher price point while launching its BEBE SPORTS-branded stores. Its sales have started taking off, but other retailers are starting to miss earnings as the late, hot summer takes an early toll on the fall lines. Recently, the retailer appeared on the Reuters Select Strong Operating Margins screen. Investors might want to take a look at these fashions.

The company is not without risk, though. It wouldn't really surprise me if bebe were to miss its estimate for the fourth quarter of 2005.

My view on this, though, is that the company is making some good long-term changes, including an improved tracking system for its catalog customers, so it can start gearing mailings to individual shopping habits, and its price positioning. Retailers miss quarters, but if it's not a company-specific issue, it's not necessarily a big deal.

My analysis suggests a potential earnings growth rate of 21.3% for bebe stores, with the share price reflecting only about a 14.4% growth rate.
BEBE has bounced today to $27.17 (+2.34%), having support at $26.

Read further:
Reuters.com: Positioning for fashion

Tuesday, August 09, 2005

Cramer's 'Mad Money' Recap: When to Speculate

There has been a lot of critisism about Jim Cramer lately, but I found an article, where he talked very reasonably. He calls attention to some really nice snippets about stock markets.

Cramer's 'Mad Money' Recap: When to Speculate
TheStreet.com

8/9/2005 7:02 PM EDT
Speculation is something that can keep investors interested and enthusiastic about their money, and it can even be necessary under the right circumstances, Jim Cramer said on CNBC's "Mad Money."

"I've got a long track record, and almost all of my biggest wins have come from pure speculation," he said. "You must learn how to do it right. You've got to know the rules before I give you permission to use the tools."

"We do not want to speculate on companies with bad balance sheets. You can speculate in the young companies and the ones with good balance sheets."

"Luck should not be part of the equation," he said, and he recommended against using margin for speculation.

Cramer also spoke about the importance of market bottoms, which are good buying opportunities if called correctly -- and of course that's the hard part. Don't rely on technical analysis alone, Cramer said, because fundamentals must also be considered. Clues to a market bottom include sentiment reaching very low levels and bulls capitulating and becoming bearish.

For the strategy to work its best, "you need to be right, when almost everybody else in the market is wrong," he said.
I agree with his last words about acting controversially to others. This is basically the old saying: Buy when there's blood in the street.

Read further:
TheStreet.com: Cramer's 'Mad Money' Recap: When to Speculate

Update 5: Live Action: Long NeuroMetrix Inc (NURO)

NeuroMetrix (NURO) break to all time high today in early trading, currently at $25.55 (+2.16%). NURO has raised already 56.5% since I made a trade less than two month ago. I am not selling it right now, hope to see even higher levels.

See also:
Update 4: Live Action: Long NeuroMetrix Inc (NURO)
Live Action: Long NeuroMetrix Inc (NURO)

Stocks to Watch: ELN

Elan Corp PLC (ELN) is trading up 28% in pre-market. Biogen Idec and Elan Announce TYSABRI(R) Safety Evaluation Update.

See also:
Yahoo! Finance: Biogen Idec and Elan Announce TYSABRI(R) Safety Evaluation Update

Monday, August 08, 2005

Saying Goodbye to Buy-and-Hold

Today, I ended up reading some articles about buy and hold strategy. Actually, on articles, saying that buy and hold is not going to produce satisfying returns.

Gregg Greenberg at TheStreet.com writes:
One such pro straying from the conventional wisdom is Jeff Knight, portfolio manager for the Putnam Asset Allocation Growth and Putnam Asset Allocation Balanced funds. Knight is forecasting a long-term, low-return world in which traditional buy-and-hold investing will not produce the kinds of returns to which American investors have grown accustomed over the past half-century.

Instead, Knight believes the best strategy for beating the indices going forward is to shuffle nimbly between asset classes and world markets.
Roger Nusbaum comment on Knight's viewpoint:
While I am not sure the extent to which I agree with the better returns through more trading, the argument is compelling and it is worthwhile to think about what you should do if we are going to have below average returns for a while to come.

More active trading, if you're good at it might make sense but I do not think this is easy for most people.
Jack Rothstein reveals his plans for near future:
Considering the current market and the action it displays, the ability to pick stocks is critical to achieve positive performance. This is a stock pickers’ market. The major averages are providing inadequate returns. The performance of the DOW has been a drag. Look at the tape and see the reality. Small and mid-cap stocks are making new highs. That is where the leadership is. That is where the money is being made during the current trend.
Nasdaq is cooling off a little and I agree that one shouldn't make too big bets on the rise at the moment. At least until Nasdaq manages to break the new minor downtrend. I don't suggest stock-picking, but just maybe staying off some days.

See also:
TheStreet.com: Saying Goodbye to Buy-and-Hold
Random Roger's Big Picture: "Saying Goodbye to Buy-and-Hold"
Jack Rothstein: Longs and Shorts

Stocks to Watch: NFLX

Netflix (NFLX) showing strength, it may be carried on tomorrow.

Stocks to Watch: WRSP

Worldspace Inc (WRSP) is trading at $17.59 (-12.05%), almost 3.5 points below it's recent IPO price.

Chinese Internet Sector: Baidu.com, 3721.com

Google signs up first AdWords partner in China
Reuters
Monday 8 August 2005, 0:25am EST
SHANGHAI, Aug 8 (Reuters) - Google Inc. has agreed to sell its popular AdWords advertisements in China through a local firm.

China Enterprise, a provider of IT services and a subsidiary of Hong Kong-listed Sino-i Technology Ltd. (0250.HK: Quote, Profile, Research), has been authorised to sell the Google AdWords service -- used in markets around the world -- in China.

Rival Yahoo Inc. (YHOO.O: Quote, Profile, Research) made its big move into China in 2003, with the $120 million purchase of a popular local search site, 3721.com.
OK, what does this article tell us? First, Yahoo made a real bargain deal with 3721.com, paying only $120 compared to Baidu.com $4 billion market cap. According to Alexa.com, the traffic rank for baidu.com is 6, and the rank for 3721.com is 14. By the way, 3721.com has mp3 search as well.

Next, it's really tough for Baidu to beat China Enterprise, the local Google AdWords provider. I tend to believe that Google has more money and possibilities to make a revenue than Baidu (although, Google owns 2.6% of Baidu.com also). Taking this into account, why is Baidu.com trading at 35 times at sector revenue?

See also:
Reuters: Google signs up first AdWords partner in China
Roberto's Nasdaqtrader: Google Adwords Lands Chinese Partner

Quotes on the Baidu (BIDU) IPO

There are some funny quotes on China Net Investor blog about Baidu's (BIDU) recent IPO (found the link via Trader Mike blog).

I'll cite some of those:
"Even with increased revenue and net income results for Q2 (around $8 million), this deal has got to have Benjamin Grahm rolling in his grave. Consider that CBS Marketwatch cited a IDC report as saying the entire China online ad market was $130 million in 2004. Now I think Baidu may surpass a $1.3 billion market cap by the end of first day of trading (China Net Investor: Baidu now has a market capitalization of $3.92 billion!), and if that happens, then I must say that I don't know of that many other companies that trade at 10x INDUSTRY revenues, even if the industry happens to be growing real fast."
Philip Lin, former executive at private equity firm, Kluge & Company; entrepreneur-in-residence at Kleiner Perkins

"This one is the return to the Internet bubble"
John Fitzgibbon, analyst in New York with IPODesktop.com
And the best one:
"Baidu.com's P-E ratio is sick"
Enzio Von Pfeil, chief executive of Commercial Economics Asia Ltd., who stressed he was speaking for himself and not his company.
Read further:
China Net Investor: Quotes on the Baidu (BIDU) IPO

See also:
Baidu.com (BIDU) IPO