It looks like the market is getting back on track a little. The oil stocks had a very nice couple day run and I am taking profit. Time to go full bore in specialty metals. Following are the trades for the fantasy portfolio.
Buy 500 shares TIE @ $30.42=($15,210.00)
Buy 300 shares ATI @ $88.46=($26,538.00)
Buy 300 shares BA @$88.89=($26,667.00)
Sell 4 contracts of GOOG Dec 460 puts (GOPXL)@ $320.00=$1,280.00
Sell 500 shares long COP @ $66.45=$33,225.00
Sell 300 shares long OIH @ $145.89=$43,767.00
Total transactions: $9,857.00
Commissions: $64.00
Total transactions: $9793.00
Portfolio
Long 300 shares FCX @ $61.64=$18,492.00
Long 500 shares TIE @30.42=15,210.00
Long 300 shares ATI @ 88.46=$26,538.00
Long 300 shares BA @$88.89=$26,667.00
Short 4 contracts of GOOG Dec $460.00 puts (GOPXL) @ $320.00=($1280.00)
Total portfolio: $85,627.00
Total cash:$15,513.80
Total gain to date: $1011.80 (1.14%)
Justifications: The defensive plays in oil worked real well but I think the big runs are over. I took the profit.
BA: It is time to get back in to Boeing with the market correction mostly behind us.
TIE: Time to load up on more metals. Titanium appears to be doing well so I think this will be a nice play.
ATI: This is another specialty metal play.
GOPXL: I am slightly bullish on GOOG but think it might still be in snide for awhile. I wouldn't mind buying GOOG if it hit $460 but most likely I'll just let these contracts expire by December option expiration.
GL investors
Disclosure: I am not currently long or short any of the shares aforementioned.
Note to all readers:This post and all other posts in this blog are for entertainment purposes only. All of the stocks listed are very highly speculative, and the portfolio is not diversified and could produce severe losses if you were to invest in these stocks. None of these stocks represent a recommendation in any way. As an individual investor, you have to assume your own risk. Prior performance is no guarantee of future returns.
Wednesday, November 29, 2006
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4 comments:
Hi Ben,
I was given a small amount of Google stock by a relative -- and with this gift, I am trying to educate myself about the equity markets. I was interested in your post (Nov 19) about comparing Google and Yahoo valuations. I'm wondering if you might a)refer me to a source where I can learn more about options expensing (in very basic terms, what does options expensing of $475m mean? Also, I understood that the YouTube purchase was cash -- I presume this is wrong?) b)help me with your valuation reasoning: I follow your post up until you calculate the Dilutive forward EPS. What does the ratio of dilutive shares(which I take to be the total outstanding shares before YouTube buyout) to Total shares after buyout yield? In other words, if you already calculated an EPS of $12.19 based on the total # shares -post YouTube buyout, why do you need to multiply that $12.19 figure against the aforementioned ratio of shares?
My question might strike you as naive -- but I hope that you might be able to at least point me to the proper source for further research.
thanks!
Your question is in no way naive. I am glad that you are interested in the fundamentals. I will write an addendum with some further analysis to clarify.
a) The $475 million is an aomount that GOOG had announced in their employee plan....I will show a link.
b) The Youtube purchase was all stock so I will post a link which shows this. The shares in the dilutive float next year will be additive to include the Youtube purchase.
I happen to think that GOOG is a fundamentally good stock. The thesis of my post was to show how numbers are used to calculate forward numbers. Many people use assumptive comparisons when they were made. This weekend I will post the links as well as a simplified analysis with an explantion.
I appreciate you reading and hope you have a good weekend.
GL
Ben
Ben,
That's very good of you to reply to my comment. Thanks so much - -I will look forward to your post this weekend. If I may ask, what would be your price target on ATI?
Neil
Following is a link that describes the Youtube purchase:
http://www.sptimes.com/2006/11/15/Business/Google_completes_YouT.shtml
Following is the 10-Q go to page 33 and this will tell how much Google plans on spending on options expensing next year:
http://www.sec.gov/Archives/edgar/data/1288776/000119312506167945/d10q.htm
To convert to GAAP from non-GAAP, I multiplied the EPS by # of shares as this is the amount of net income that GOOG is expected to make on a non-GAAP basis. The $475 million is subtracted from this amount to give a net income on a GAAP basis. If the number of shares is divided by the number of share, that will give us the GAAP EPS.
The number of shares that GOOG has due to Youtube purchase is additive to the amount of shares currently outstanding. The ratio of the nummber between current shares outstanding and future amount due to dilution will decrease the recalculated EPS by the ratio. This is just a slight ratio.
I hope that this helps out and simplifies the math.
I tend to think that ATI will probably see $95.00 by the end of the year maybe $100.00. I tend to throw caution into stocks like this because when metal prices drop these stocks move as a sector. I hope you had a good weekend.
GL
Ben
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