Hypothetical Stock Picks: Disney Earnings After Record Breaking Quarter

This one is an experiment with a different strategy, according to my research, 60% of analysts are currently bullish on Disney. Their upcoming earnings report will cover the release of several blockbusters like Star Wars and Captain America, but also the worrying performance of ESPN.

A huge amount of coverage suggests that Star Wars in particular has had a very good return, more than covering their purchase cost for the franchise with the first new release. Seeing Disney’s price trend in a fairly straight line while reading this news makes me feel confident in buying now, ahead of the earnings report Tuesday.

I will say buy now and set a goal of +5/-2.5% from $105.

This pick connotes a potential strategy shift; incorporating metrics about average analyst sentiment ahead of earnings reports. Let’s see how it goes.

Update 2016-05-09:

Yesterday, reports broke that Disney’s new blockbuster Captain America now has the fourth highest open ever, giving them a second major recent win. I am confident I made the right choice with this one!

Update 2016-05-11:

Earnings came in at 2.9% below expectations which sent the stock down 5.6%. The weakness was exactly as predicted, ESPN. As well as to a lesser degree, their parks and resorts. The strength was as expected, Star Wars and other movies.

This makes me feel like the stock is undervalued. I’ll bet again on +3/-1.5% from $101.84

Update 2016-05-16:

Early this morning, the stop loss was met again, reiterating what everyone has been saying; that you should never double down on a bad trade. :[ at least this time it was only 1.5%

Hypothetical Stock Picks: Starbucks Cutting Costs

Starbucks has plateaued for over a week at $56 after losing 13% on an earnings miss last month.

I couldn’t find any analysts who recommended anything other than strong-buy or hold, and Nasdaq.com reports the average 12 month price target at $68, or growth of over 21% this year!

As someone who used to work there and really understands how the business works and what major recent structural changes have happened, Starbucks is consolidating power and profit centers and cutting costs and promotional giveaways to customers. This all comes together to tell me they are serious about making this a strong year.

I will buy long and set a goal of +10/-5% from $56.

Hypothetical Stock Picks: Tesla Reports Earnings Wednesday After Close

Tesla is announcing earnings Wednesday after the market closes. Currently, it is down a bit after its 13% jump following the announcement of their new electric vehicle.

The bottom line for me is that they have sold almost a half-million of this new car since then and they have not even started production yet. Each of those people paid $1k to reserve their Tesla, meaning they were handed a half-billion dollars in cash by people who intend to buy a Tesla once they come out.

I think the earnings report will be very good. If it starts low for its recent range on Monday, I would say this is a very good time to buy and hold until a day or two after the earnings report.

Let’s see how it goes!

 

Update 2016-05-02:

On the first of last month, I bet Tesla would go up 5% after the Model 3 unveil. It ended up going up from $237 to $265, 11.8%!

It is now back down to $238.

We know several key things about their earnings announcement Wednesday;

  • Tesla sold over 400,000 preorders of the Model 3 at $1,000 each, effectively handing them $400m in cash for cars that have not even started production yet.
  • Sales of existing vehicles are up over 50% from last year.

It’s going to be an exciting Wednesday for Tesla. I would probably wait until we get closer to Wednesday to buy, as the stock is trending down for the last few days.

 

Update 2016-05-04:

Yesterday, Tesla confirmed rumors of higher battery size options wich increase the price of some of their existing models. This morning, the stock is trading at $228, at the bottom of its 5-day range.

I would buy now if I was ready to start trading for real, and set a goal of +5%/-2.5%, but not sell until tomorrow, after the earnings report comes out.

Let’s see how it goes!

 

Update 2016-05-04:

At around 10am this morning, this trade would have hit the stop-loss and sold down 2.5%. Unfortunately, though the news was all good and all better than expectations, the majority of analysis seemed to report that the stock was over-valued.

One report said that Tesla was valued at over $600k per car sold that year, where GM is valued at under $4k per car sold last year, and that this means Tesla is over-valued despite the obvious and dramatic long-term differences between the two companies.

Even though the long-term prospects had greatly increased and the short-term prospects had beaten expectations, the market decided the stock was over-valued.

I still think that when this correction ends, it will be a good time to buy long.

This is my first loss during this learning journey. I will play it safer on the next trade!

Hypothetical Stock Picks: Shorting Valeant

On my commute to work this morning, I heard the news that Valeant’s ex CEO will be testifying before congress today. He is accused of having acquired exclusive rights to several cardiac drugs and manipulating corporate transactions in order to cause the prices of the drugs to go up.

NPR elaborated that recently, numerous cases like this have come up and some analysts expect congress to make an example of this CEO.

This made me feel like it would be a good stock to short, so I wrote down the current price. I will watch this today and see how it goes!

 

UPDATE: 1:54PM PST, same day.

The stock finished down 3.56% from $35 when I wrote this! This would have been a good short. That puts me at 2-0 with two great predictions so far, after picking Tesla long, the day after the recent keynote. It made it up over 13% in under a week!

I think I want to pick a couple more winners before I make my first real trade. Wish me luck!

 

Update 2016-05-02:

Valeant is currently down to $29. A drop of 17% since my original post. This would have been a very good short!

Formulating A Strategy For Speculative Investment

For several months now, I have been learning as much as possible about investment as a precursor to getting into trading; before doing any actual trading, I decided to formulate clear goals and strategies.

I posted before about the broad strategy I have decided on; splitting all the money I invest evenly between the two apps Robinhood and Acorns which focus on short and long-term investment respectively, and offer exceptional pricing compared to other platforms, especially traditional brokerages and banks.

The long-term half of my broad strategy runs itself; Acorns manages a diverse portfolio for you, selecting a wide range of blue chips, bonds, industrials, etc.

The other half of this broad strategy will require clear planning as to how I will use Robinhood to do the short-term speculative trading.

I will need to decide on growth goals for each trade as well as how to pick stocks.

So far, I am leaning towards an initial goal of +5% with a stop-loss of -2.5% per trade, unless the stock’s range suggests another goal.

In the long-term, I would love to develop analytics tools to help sift through larger datasets and make more complex predictions, factoring in volume, social-media sentiment, press sentiment, and performance data… Baby steps.

The methods I like so far for picking stocks are earnings reports, product launches, and current events as they relate to public sentiment.

 

Stay Tuned!

Getting Started: Learning About Investing

Testing The Waters

I have decided to get into investment. Most of my knowledge of investment has been fairly anecdotal, so I decided to immerse myself for the last few weeks before making any decisions about my goals or investment strategies.

My first step was to build a list of news sources to draw on. I came up with a list of subreddits as well as a few blogs and websites. I aggregated these into a single feed which I read through once or twice a day. This way, I am getting fluent in the kinds of conversations people are having around their investment strategies and goals, and staying up to the minute on trends and current events related to investment strategy.

Like any field in life; whenever I find a term or topic that I don’t understand, I read as much as I can about it until I can speak confidently about it.

This initial knowledge let me start to engage several key mentors with lots of experience in the field. After numerous rewarding conversations, I started to fill in some of my knowledge gaps and form some conclusions about the strategies and goals I will be setting out for myself;

  • Investment comes down to finding ways to increase the amount of money you have, instead of losing value to inflation. Putting $100 under the mattress means you are throwing part of it away every year to inflation. Hopefully you find a better place to put it where it will grow instead of shrinking, an investment.
  • Investment breaks down broadly into two categories, short-term and long-term.
    • Long-term investments are about making safe bets that let you beat inflation while minimizing risks to maintain your long-term position.
    • Short term investments are called speculative investments. Their goal is to take risks in search of higher, faster returns.
  • Most speculative or short-term investors are not successful.

Speculative investment is about making accurate predictions of when a stock is about to go up or down, and then buying and selling at the right time to accomplish the goal you set out to.

From the start of my investment learning journey, I have tried to think of what stocks I would buy, and then follow their progress to see whether my predictions lived up to the goals I set. All my strong opinions were met with success, but the words of one mentor stuck in my head; the vast majority of speculative investors are not successful.

Above all, my learning journey has taught me that you need to build a system and stick to it, and you need to hedge your bets.

From the outset, I planned to use the app Robinhood to do my actual trading. This app offers commission free trades as well as margin trades, meaning not only do you get to buy and sell stocks without paying fees per trade as with every other previous stock trading platform, but they will loan you the money to do it. If you are successful, you will make money without investing any. If you fail, you pay up. This strikes me as a dangerous environment for an unwary investor or one without a strong plan in place for what they want to do.

I heard of another app called Acorns which makes it easy to invest for the long-term. Their business model involves investing small amounts during every transaction you do throughout your day, and they have very low rates compared to competitors.

Getting My Strategy Feet Wet; Hedging

I have decided that my strategy for hedging my bets it to invest an equal amount into each app. Every time I am tempted to make short-term bets in Robinhood, I will also invest an equal amount into Acorns to save for the long-term. This means I will be able to see their balances side by side in widgets on my homescreen and track how well my developing strategies flesh out.

More to come soon!

Stock Picks: Tesla Model 3 Unveil

Tesla is announcing their Model 3 today. I believe the stock will see a dramatic bump because this car is going to change the world. It is affordable, excellent and a real alternative to gasoline cars.

Elon Musk believes in what he is doing, and he will not stop until it is done.

This is a leader you can believe in and trust to accomplish his goals. This car is going to be an incredible product. And with pre-orders, this is going to be a ton of new cash for Tesla overnight.

Some people on WSB are betting on +12% but I’m setting a goal of +5% to be safe.

 

Update: 4/4

My bet paid off, and i finished up 5%!