fletchlivesforecasts

Today's Opposites

2008-08-12T03:49:00.006-05:00

Watch for AMD, Advanced Micro Devices, to tank today. Moody's Investors Service released a statement saying that they "believe that AMD will remain challenged to internally fund the advancement of its process capability and production capacity, which is essential to keep pace with competitor manufacturing cost reduction and process node advances." Also the corporate family ratings of AMD was downgraded to B2 from B1 because of operating losses. In addition to that, Moody's also cut the rating of a $390 million senior note, which is due in 2012, to B3 from B2. Bad news all around, except for the rushed a.m. press release of their new graphics card which actually looks like a future positive, but shouldn't stop the bleeding for today.

Look for a sharp upward turn from FLR, Fluor Corporation, as it looks at the 70's price range and kisses it goodbye. FLR second-quarter net income more than doubled from a year ago. Second-quarter results include a pre-tax gain of 26 cents a share from the sale of a joint venture interest in a wind farm project. FLR also lifted 2008 profit view to range far above the expectations of Wall Street. Watch this one soar today.

Fixed Return Options (FRO)

2008-07-30T04:20:00.008-05:00

Fixed Return Options or FROs are a U.S. investment product which debuted in May 2008. They are also known as "binary options" because there are only two possible outcomes at expiration. FROs are all-or-nothing options that pay a fixed amount of $100 if exercised in-the-money or pay absolutely nothing if they expire out-of-the money. Binary options have been available in the over the counter market but this marks the first orientation to the retail investor. Fixed Return Options were invented by a group of financial services executives, guided by an executive team at the American Stock Exchange and Donato A. Montanaro, CEO and Chairman of the online brokerage firm Tradeking.

The standardization of binary options in this FRO format allows them to be exchange traded with continuous quotations. The underlying securities FROs can include both stocks and ETFs (Exchange Traded Funds). There are two types of FROs: Finish High and Finish Low. Finish high would mean to finish in-the-money if the settlement value of the underlying security is greater than the Strike Price ($.01 or more above) at expiration. They are out of the money if the settlement value of the underlying security is lesser than the Strike Price at expiration. Finish low would mean to finish in-the-money if the settlement value of the underlying security is lesser than the Strike Price ($.01 or more below) at expiration.

Fixed Return Options are listed on the American Stock Exchange (AMEX) and can be bought or sold at any time during the life of the contract. The pricing of the FRO will change over time based on the movements in price of the underlying security. FROs have expiration months for trading that are the same as standard listed options for the same underlying security. While these instruments may be easier to understand compared to buying or selling "regular" options (calls and puts), beginning investors should always research the many risks before participating in the options market.

Whether a FRO is in-or out-of-the-money is based on calculating the stock or ETFs AMEX FRO Settlement Index value. This is considered the Volume Weighted Average Price (VWAP) on the day in which the option expires. This is calculated by adding up the dollar value of all trades of a given stock or ETF on a given day and dividing that sum by the total number of shares traded. Basically VWAP could be explained by stating the average dollar price of a stock or ETF on a particular trading day. The reason this method is used for settlement at expiration (instead of closing price for the underlying stock or ETF) is to prevent price manipulation, considering the difference in a one cent increase or decrease could potentially change the outcome between receiving $100 per contract and absolutely nothing.

FROs are available on a variety of equities and ETFs:

Symbol FRO Symbol

APPL AXO
CSCO CMQ
C EFH
DIA DCQ
GE DOC
GS TLG
GOOG TBA
HD HEM
IBM TSB
INTC IDP
EEM PTT
IWM DNZ
JPM LIV
MSFT RIS
OIH HKT
QQQQ NKN
SPY SQY
XLE LPA
XLF RZP
WB BWK

BEA Systems: Screaming Buy

2007-05-16T04:12:00.000-05:00

Takeover rumors have been flying around BEAS. Business software and services have been receiving substantial attention as of late. If there is speculative money to invest, it might pay to examine this one. Recently Credit Suisse lowered its rating to "neutral" from "outperform", stating that recent thoughts of a takeover from Hewlett-Packard Co.(HPQ) "was more wishful thinking than reality." They went on to reiterate their $14 price target on BEAS. In my opinion, Hewlett isn't the only prospective buyer. At this time, this company is in a great position for its shareholders. If they continuously beat estimates, they should have no problem standing on their own and meeting that $14 price target. If BEAS misses estimates in the future, they become a more attractive takeover target, enabling another company to possibly make a purchase at a discounted price. It's not that often, within an investment, that something can be perceived as a win-win situation.

Got Milk? Got Problems

2007-05-14T04:09:00.000-05:00

Dairy economists predict the retail price of milk could rise as much as 30 cents per gallon by this fall. Is that a big deal? Maybe not to the average consumer, but for businesses which use dairy in the production of their goods; it is a big deal. The latest company impacted by the increase in price is Hershey Co. They cut their earnings expectations because of the rising demand for ethanol. Fuel and feed costs for farmers and the need for milk products around the world are the main reason for the increase in price. Take notice of organizations that are not easily able to adjust for the adverse effect of the rise in dairy pricing.

Short And Sweet: Don't Be Surprised

2007-05-10T07:21:00.000-05:00

Here is a chart of the performance of Darden Restaurants vs. California Pizza Kitchen (CPKI) over the last three months.

Darden owned Olive Garden, saw same unit sales rise 3 to 4 percent higher in March after posting positive comps in consecutive quarters. California Pizza Kitchen reports later today. Their preliminary report had comps climbing higher for the same period. There has not been any downturn in stock price over the last few days. However, there has been some weakness throughout the sector. California Pizza Kitchen might be able to meet the estimates for the first quarter (.18/share on $149.87 million in revenue), but with uncertainty throughout the sector; don't be surprised if they fall short.
(Chart courtesy of Yahoo.com)
Update: 05/11/07 CPKI reported .18/share on 149.4 million. Profit dropped 22% as labor and food costs rose.

The Federal Open Market Committee (The Fed) Will Release Their Statement At Approx. 2:20 P.M. ET; Also, Featured Earnings For Today

2007-05-09T03:43:00.000-05:00

Investors will be awaiting the words of Chairman Ben Bernanke today. The Fed is expected to leave interest rates unchanged and to address both moderate economic growth and inflationary pressures. Any difference in the statement's phrasing will be examined "under a microscope" and could lead to price fluctuation in the major indexes. Today, this is the major story in focus throughout the investment world. However, there are other affairs to speak of concerning earnings. DirecTV Group Inc. (DTV) reports today. Analysts are expecting earnings of .30/share on $3.9 billion in revenue. With increased competition encompassing the market, it should be interesting to hear their guidance/outlook. It will be possible to further gauge the strength/weakness of the housing market when Toll Brothers Inc.(TOL) reports. Analysts estimate earnings per share of 41 cents, with revenue coming in at $1.10 billion. Whole Foods Market(WFMI) also reports today. WFMI began the quarter by announcing the planned acquisition of rival, Wild Oats Markets, Inc. Analysts expect earnings of .36/share on $1.49 billion of revenue. Operating margins have been pressured by the opening of large format stores and labor costs. Regardless of the possible (near-term) asperity, the future looks promising. WFMI reports later today.
Note: To see the company earnings calendar for today, scroll down to the link on the bottom (right side) of the page.

Comcast vs. Verizon: Why The Battle?

2007-05-07T07:37:00.000-05:00

For market share, of course. There are many people who believe that these two companies will have to share customers and that there will be one clear "winner" between the two. While that may be somewhat true(the sharing of the customers part), I believe that both of these companies can be successful distributing their products throughout the market. Verizon has done an outstanding job positioning themselves as the best wireless network/provider. Comcast has focused on being the #1 cable provider. With services overlapping(phone, internet, cable, and video), I believe that Comcast is taking the lion's share. They expect to have 20% of households subscribing to digital phone service, which has helped drive subscriber additions in recent quarters. In certain locations, Verizon's services are not available; however, they will probably take share from other wireless providers(having such a positive reputation concerning their network). Sometimes there isn't a clear cut winner in the battle for market share. These companies can(and should)coexist and both be successful. The consumer is the one who wins, concerning this type of competition.
Note: The cable industry(National Cable and Telecommunications Association)gathers this week in Las Vegas for their annual summit. Expect subscriber growth and bandwidth to be in focus. Look for new developments in technology to be mentioned.

Brocade Reports Earnings May 31: There's Still Time To Get In

2007-05-02T20:47:00.000-05:00

Brocade Communications Systems, Inc. is scheduled to report earnings on May 31. I generally focus on short term holdings, looking for a catalyst that will move a stock. However, when I find a good company that I believe in, (because of various factors) I may change my investment/trading strategy. Brocade is one of those companies that I believe is a solid, long term holding. I think it's possible that BRCD doubles within the next two years. Brocade is still considered a "speculative stock" to some, while others have it on their radar and know where it's headed. I'm not saying it's going straight up, but I am saying that I believe BRCD's trading range will steadily increase over time. You wouldn't be wasting time if you took a look and came to your own conclusion. Some of the growing pains from the acquisition of McData have probably been resolved by now (elimination of certain departments/comparable positions, etc.). If you're on the speculative side: If Brocade beats estimates, this may be the last time to get in before 10. The analyst at Goldman, who downgraded the stock to a HOLD, has an $11 price target. Today's selling, because of that news, has created a great entry point.
More to come on BRCD before earnings.

Amazon is EXTREMELY overvalued

2007-04-30T22:51:00.000-05:00

Take a look at this chart. Amazon.com recently shattered analysts expectations, reporting 26 cents per share vs. 15 cents per share in net income. Is this reason enough to buy the stock? You tell me.The company rose from 44.75 to 62.78 in a matter of two days. That is over 18 dollars or a 40% gain. Earlier in the week the company was valued at $15b, which soared approximately to $25b. Many short-sellers ran to cover their positions. With two analyst downgrades, within the last three days, the stock is still trading above 60. It seems that traders are focusing on the present and not the future. While I like the company for a longer term investment, shares have risen too qickly and these price levels are too high. I wouldn't be surprised if this stock retraced to the early - mid 50's range within the next three to five months. (Chart courtesy of Yahoo.com)

Verizon VZ beats estimates

2007-04-30T10:36:00.000-05:00

Excluding one-time charges, Verizon topped expectations, first quarter profits were measured at 56 cents per share vs. estimates of 53 cents a share. Revenue came in at 22.58b vs. estimates of 22.45b. In early trading, shares of VZ traded between 37.69 - 38.30. That looks pretty good from here. My next featured stock is soon to come.

Verizon VZ Reporting Earnings Mon. Morning

2007-04-29T16:27:00.000-05:00

Verizon Communications Inc. reports first quarter earnings on Monday morning. Analysts expect earnings of 54 cents per share on sales of 22.49 billion. Most analysts are shying away from this one, they're not saying anything about weakness but they're not mentioning strength either. I'm not sure if they'll report stellar numbers, but I do think that they will beat the estimates. We'll see tomorrow morning.

Sometimes You Should Roll The Dice

2007-04-29T13:37:00.000-05:00

I have learned that I possess a passion for the stock market and trading. I have made both exceptional and questionable trades. What I haven't learned throughout that process is the most advantageous way to keep track of my thoughts which lead me to make or not make those trades. Sure I can look at a printout, but I don't have any explanation of why I made the decision in which I did at that time, or what factors led me to believe that the stock would move up or down. I mostly concentrate on short term, speculative securuties that move on events or news. I wanted an interactive place where I could voice my opinion and get feedback from others about how I feel about particular stocks. I invite everyone and anyone to share their opinion about my assessments on anything I ever write here. Sometimes you should roll the dice. Investing doesn't have to be a stuffy subject. If anyone has time to play the moves of individual stocks with a small speculative account, it should be done. It may be risky, but it also could be well worth it; not to mention how fun it can be. Discussions are open and everyone is welcome to give their opinion/feedback whenever they would like. I plan to make a few posts a week; maybe more. I'm looking forward to being able to better track my investment opinions and hearing the opinions of others interested.