All things STOCKS

[Thunder Good-Oil]

What about KTOS? Might go with a defense ETF since I'm in long term.

barrons.com

The unrest in the Middle East has global stock markets dropping—the Dow Jones Industrial Average is down 168 points, or 0.6%, in midday trading Friday—but geopolitical unrest, perversely, can be good for the defense industry.

Defense stocks are rising in the aftermath of the U.S. airstrike that killed Qassem Soleimani, a top Iranian general—and an Iraqi paramilitary commander—in Iraq. Gains can be sustained because military tensions can make cutting defense spending untenable, especially in a U.S. presidential election year.

Stock in defense giant Lockheed Martin, for instance, surged more than $17 a share, or 4.3%, on Friday.

“If Middle East conflict were to ratchet up....we think it could be tougher for Democratic Party electoral candidates to argue against a stronger defense budget in 2020,” wrote Citigroup analyst Jonathan Raviv in a Friday research report. That removes a sentiment overhang, according to the analyst. “As is always the unfortunate case, defense stocks tend to benefit from perceptions of heightened risk and the potential for geopolitical conflict.”

President Donald Trump ordered the strike in retaliation for the attack on the American embassy in Baghdad this week.

After the strike, the U.S. Defense Department released a statement saying, in part: “General Soleimani was actively developing plans to attack American diplomats and service members in Iraq and throughout the region....This strike was aimed at deterring future Iranian attack plans.”

It isn’t only stock in Lockheed Martin (ticker: LMT) that is rising. Bomber maker Northrop Grumman (NOC) stock is up 5.4%. General Dynamics (damn) shares have risen 0.8%. Stock in a smaller defense player, Kratos Defense & Security Solutions (KTOS), is up almost 10%.

Defense stocks have been strong recently. The S&P Aerospace & Defense Select ETF (XAR) has returned almost 29% over the past year, edging out the 25% comparable gain of the S&P 500.

Of course, one conflict shouldn’t cause wholesale changes to an investor’s portfolio. It could, however, make defense stocks more attractive at the margin. Baird analyst Peter Arment, for instance, became more positive on Buy-rated L3Harris Technologies (LHX) and Mercury Systems (MRCY) following Baird’s November investment conference.

Those are two other names, in addition to large defense contractors, that investors can research if they want more exposure to the sector.

 

[GoVolsDR]

Just executed a variety of OTM and ITM calls and call debit spreads on UCO, XOP, RTN, LMT, BA, NOC, and General Dynamics (site autocorrects the ticker). Continuing to add to my positions in precious metals and energy.

 

[UTVolax24]

Someone bought 460m worth of alibaba shares today

A lot of smart investors are moving into BABA. I'll leave it at that.

Precious metals have recently been breaking through critical technical areas on their respective charts - Gold, Silver, and Copper in particular. I'm still highly bullish on silver, especially given the retrace of the XAU / XAG ratios back from ATHs this year. This typically been a very bullish technical indicator, often indicating bull runs in both commodities.

I've opened up some additional exposure to precious metals, and I'm long on gold and silver miners, in addition being long on ETFs that track the spot prices of both metals.

At the risk of speaking very generally, unless you have a real fine tuned macro view, a lot of these individual names are highly levered and can never really generate a positive ROE or ROIC. I tend to stay away from these names unless they are real catalyst driven, but you can argue going long some gold given the current market environment.

Suggestions on finance and defense tickers?

I love Carlyle at the moment. Look for any PE / Asset managers that haven't yet converted into a C-Corp, or those that just recently converted. Tend to want to avoid banks unless its JPM. Don't like the MS / GS models. BoA is prob okay, to be fair. WFS is un-investable. BX is very scary for me at the moment. A big portion of their business is dying and dying fast.

Within Defense - I'd avoid BA for right now, this is going to be a longer mess than most people think or tend to want to believe. I like damn, NOC, and LMT. Also like a few private companies that only offer debt. If you think tensions with IRAN escalate further, you're better off just buying a well diversified ETF or creating your own ETF with the 5/6 names you like. Can post the 6-10 single names i would put in an A&D portfolio if you'd like

 

[Big Gucci Sosa]

A lot of smart investors are moving into BABA. I'll leave it at that.



At the risk of speaking very generally, unless you have a real fine tuned macro view, a lot of these individual names are highly levered and can never really generate a positive ROE or ROIC. I tend to stay away from these names unless they are real catalyst driven, but you can argue going long some gold given the current market environment.



I love Carlyle at the moment. Look for any PE / Asset managers that haven't yet converted into a C-Corp, or those that just recently converted. Tend to want to avoid banks unless its JPM. Don't like the MS / GS models. BoA is prob okay, to be fair. WFS is un-investable. BX is very scary for me at the moment. A big portion of their business is dying and dying fast.

Within Defense - I'd avoid BA for right now, this is going to be a longer mess than most people think or tend to want to believe. I like damn, NOC, and LMT. Also like a few private companies that only offer debt. If you think tensions with IRAN escalate further, you're better off just buying a well diversified ETF or creating your own ETF with the 5/6 names you like. Can post the 6-10 single names i would put in an A&D portfolio if you'd like

I went with PPA

 

[UTVolax24]

I've been crushing on HAL

Oil and Gas, let's get money in 2020. So undervalued. XLV is my wife, but XLE is my GF from high school who I know is under valued

I thought about buying some oil services after the Saudi oil infrastructure was blasted a few months ago. But I don't know which publicly traded stocks would benefit directly... but even a services company not doing business directly in SA, there's likely a positive ripple effect if their competitors got a **** ton of a windfall in business.

I was burned badly speculating in oil prices 2 or 3 years back. Services companies and diversified oil and energy are more appealing to me. I wonder if coal will benefit? Previous POTUS wasn't friendly to that industry and it gets put in a bad light by the Left/Liberals/Dems, but if an all out oil crisis is in the cards, we are the world's leader in coal. I don't know if any new coal fired plants are going to be commissioned any time soon (as long as Natty is so cheap).

None of the O&G names are cheap. Optically maybe, but these companies cant generate a positive return in any environment less $75/bbl WTI. (excluding the majors). You will not see an inflection in O&G equities until WTI reaches >$70-$75. This is the new Coal. I can go into far greater detail here if you'd like, just let me know. But I would only short anything related to O&G.

I'd avoid O&G names at all cost.

 

[GoVolsDR]

Can post the 6-10 single names i would put in an A&D portfolio if you'd like

Please and thank you, perfect timing

 

[UTVolax24]

I'll be available the rest of this week and this weekend. Any questions anyone wants to ask, feel free. Can go far more in-depth in anything I've mentioned previously as well.

Also if anyone is ever in NYC and wants to grab a beer / coffee feel free to give me a holler!

 

[GoVolsDR]

None of the O&G names are cheap. Optically maybe, but these companies cant generate a positive return in any environment less $75/bbl WTI. (excluding the majors). You will not see an inflection in O&G equities until WTI reaches >$70-$75. This is the new Coal. I can go into far greater detail here if you'd like, just let me know. But I would only short anything related to O&G.

I'm definitely on board with you regarding the macro, lowered supply, and a glut of energy. Certainly, global instability and conflict could be a potential catalyst. We saw prices hit $68 per barrel when Saudi was attacked, but the market rejected those prices, quickly. What else do you foresee potentially driving down oil and gas prices? In your opinion, is the macro strong enough with oil and gas that traders should stay away, or just short it? I've been long and have historically held positions in this sector, but I'm more than happy to use some medium or long term put options to hedge.

 

[Thunder Good-Oil]

Let's not forget that the oil supply is finite.

 

[volsarelife1]

Been having a good run in the OTC land lately.

Ran with SNPW from .0007 to .0062 for over $14,000 profit.

IGPK at .0012 my next runner.

IGPK hit .0026 today. Golden cross occuring with a upper bollie break. Up $10,000 on this one now. Going to run from .0012 to .01+

 

[Go aeiou]

I've not thought of them as sleazy or corrupt. At least not more than most.

There are only 2. Airbus is operating inside of that EU mess. I like BA's lack of competition and the floor as a strategically critical company. I am surprised that it's not pulled back more as long as their problem has been unresolved. Spirit (the BA supplier, not the airline) is probably the bigger risk, but also potentially has the bigger reward ahead if/when they get the 737 mess resolved.

Will BA get their problems resolved?. Will that plane fly again ?
They are fortunate that there were 9nly two crashes. Losses should not be that great. Perhaps that is why no drastic pullback.

I prefer BA planes in general when we fly. If you are in coach none are very good. I'll take Jetblue though.

 

[Thunder Good-Oil]

Will BA get their problems resolved?. Will that plane fly again ?
They are fortunate that there were 9nly two crashes. Losses should not be that great. Perhaps that is why no drastic pullback.

I prefer BA planes in general when we fly. If you are in coach none are very good. I'll take Jetblue though.

No doubt they've taken a credibility hit. Surely they can fix the problem. They've made thousands of similar machines that haven't been dropping out of the sky.

 

[UTVolax24]

I'm definitely on board with you regarding the macro, lowered supply, and a glut of energy. Certainly, global instability and conflict could be a potential catalyst. We saw prices hit $68 per barrel when Saudi was attacked, but the market rejected those prices, quickly. What else do you foresee potentially driving down oil and gas prices? In your opinion, is the macro strong enough with oil and gas that traders should stay away, or just short it? I've been long and have historically held positions in this sector, but I'm more than happy to use some medium or long term put options to hedge.

The trade, in my opinion, Is going long Oil and NatGas futures and shorting E&Ps and OFS names. Been pitching that trade for a while now and its worked nicely and you see the geniuses on CNBC saying its time to rotate into O&G names. Clearly they've never looked at those names beyond multiple and relval analysis.

None of the E&Ps and OFS names (ex the majors and COP) can generate a positive return or FCF. Right now these guys are drilling their best acreage and its depleting fast. Now they will be forced to rotate to Tier 2 acreage which will have greater declines and lower recoverable reserves. This becomes important because in order to keep production flat or grow it, you will have to spend more and more and more money, meaning it becomes harder and harder to generate positive FCF or a positive ROE, ROCE, ROIC, etc. They only way these companies survive is through M&A and non premium all stock M&A (Look at SRCI and PDCE as an example). If that's the case you need to see continued multiple compression. The only way these companies can make it work is if oil is >$75/bbl. If that happens it likely still doesn't work, because what you'll see if every E&P try to bring forward production and bring forward value (hedging). which will drastically increase supply and push oil prices back to the $50s. If you look at the forward curve for WTI / Brent it hasn't moved. Only the front end of the curve has moved, highlighting what I have said above. These business models don't work, simply put.

Let's not forget that the oil supply is finite.

Further proving my above point. I'd rather be long Oil futures and short O&G related stocks.

CHK, anyone? I’ve got 5,000 shares at an average of .90...hoping to see 1.20+ before I sell.

This is a tricky story that I know very well. I'm personally hoping the stock is delisted. You'll see forced selling and the stock should fall to around $0.30. Most institutional accounts wouldn't be able to hold the stock. If that occurs, i'd likely put on a VERY LARGE position. Management would engage in a reverse split, after Doug and other insiders purchase shares, to get the stock relisted. Maybe a 5:1 reverse split. Something like that. Look at Superior Energy (SPN) as a good proxy for what might occur in that scenerio. Bought the stock at a pre reverse split price of ~$0.15... made a great return. CHK could end up filing for Ch11 if they cant sell their Haynesville acreage to Comstock and Jerry Jones. I personally think they get this sale done.

When you see CHK file, that will likely be the "bottom" for the O&G space. The mgmt team will fight and fight and fight some more before they file. To be blunt, at current levels i am less involved. Granted the trading at a HF vs an individual are very different. If you are okay taking a 60% loss for a period of time, id hold it, if you aren't i'd get out. Which is why I am hoping they get delisted (sorry), cause then I will feel a lot better about getting long.

 

[VolAllen]

The trade, in my opinion, Is going long Oil and NatGas futures and shorting E&Ps and OFS names. Been pitching that trade for a while now and its worked nicely and you see the geniuses on CNBC saying its time to rotate into O&G names. Clearly they've never looked at those names beyond multiple and relval analysis.

None of the E&Ps and OFS names (ex the majors and COP) can generate a positive return or FCF. Right now these guys are drilling their best acreage and its depleting fast. Now they will be forced to rotate to Tier 2 acreage which will have greater declines and lower recoverable reserves. This becomes important because in order to keep production flat or grow it, you will have to spend more and more and more money, meaning it becomes harder and harder to generate positive FCF or a positive ROE, ROCE, ROIC, etc. They only way these companies survive is through M&A and non premium all stock M&A (Look at SRCI and PDCE as an example). If that's the case you need to see continued multiple compression. The only way these companies can make it work is if oil is >$75/bbl. If that happens it likely still doesn't work, because what you'll see if every E&P try to bring forward production and bring forward value (hedging). which will drastically increase supply and push oil prices back to the $50s. If you look at the forward curve for WTI / Brent it hasn't moved. Only the front end of the curve has moved, highlighting what I have said above. These business models don't work, simply put.



Further proving my above point. I'd rather be long Oil futures and short O&G related stocks.



This is a tricky story that I know very well. I'm personally hoping the stock is delisted. You'll see forced selling and the stock should fall to around $0.30. Most institutional accounts wouldn't be able to hold the stock. If that occurs, i'd likely put on a VERY LARGE position. Management would engage in a reverse split, after Doug and other insiders purchase shares, to get the stock relisted. Maybe a 5:1 reverse split. Something like that. Look at Superior Energy (SPN) as a good proxy for what might occur in that scenerio. Bought the stock at a pre reverse split price of ~$0.15... made a great return. CHK could end up filing for Ch11 if they cant sell their Haynesville acreage to Comstock and Jerry Jones. I personally think they get this sale done.

When you see CHK file, that will likely be the "bottom" for the O&G space. The mgmt team will fight and fight and fight some more before they file. To be blunt, at current levels i am less involved. Granted the trading at a HF vs an individual are very different. If you are okay taking a 60% loss for a period of time, id hold it, if you aren't i'd get out. Which is why I am hoping they get delisted (sorry), cause then I will feel a lot better about getting long.

I jumped ship yesterday at .96 and took profits. Anyone remember my Party City (Prty) call a month or so ago? Up 30%..

 

[GoVolsDR]

The trade, in my opinion, Is going long Oil and NatGas futures and shorting E&Ps and OFS names. Been pitching that trade for a while now and its worked nicely and you see the geniuses on CNBC saying its time to rotate into O&G names. Clearly they've never looked at those names beyond multiple and relval analysis.

None of the E&Ps and OFS names (ex the majors and COP) can generate a positive return or FCF. Right now these guys are drilling their best acreage and its depleting fast. Now they will be forced to rotate to Tier 2 acreage which will have greater declines and lower recoverable reserves. This becomes important because in order to keep production flat or grow it, you will have to spend more and more and more money, meaning it becomes harder and harder to generate positive FCF or a positive ROE, ROCE, ROIC, etc. They only way these companies survive is through M&A and non premium all stock M&A (Look at SRCI and PDCE as an example). If that's the case you need to see continued multiple compression. The only way these companies can make it work is if oil is >$75/bbl. If that happens it likely still doesn't work, because what you'll see if every E&P try to bring forward production and bring forward value (hedging). which will drastically increase supply and push oil prices back to the $50s. If you look at the forward curve for WTI / Brent it hasn't moved. Only the front end of the curve has moved, highlighting what I have said above. These business models don't work, simply put.



Further proving my above point. I'd rather be long Oil futures and short O&G related stocks.



This is a tricky story that I know very well. I'm personally hoping the stock is delisted. You'll see forced selling and the stock should fall to around $0.30. Most institutional accounts wouldn't be able to hold the stock. If that occurs, i'd likely put on a VERY LARGE position. Management would engage in a reverse split, after Doug and other insiders purchase shares, to get the stock relisted. Maybe a 5:1 reverse split. Something like that. Look at Superior Energy (SPN) as a good proxy for what might occur in that scenerio. Bought the stock at a pre reverse split price of ~$0.15... made a great return. CHK could end up filing for Ch11 if they cant sell their Haynesville acreage to Comstock and Jerry Jones. I personally think they get this sale done.

When you see CHK file, that will likely be the "bottom" for the O&G space. The mgmt team will fight and fight and fight some more before they file. To be blunt, at current levels i am less involved. Granted the trading at a HF vs an individual are very different. If you are okay taking a 60% loss for a period of time, id hold it, if you aren't i'd get out. Which is why I am hoping they get delisted (sorry), cause then I will feel a lot better about getting long.

Great post, really appreciate all of this content. If I could gild this post, it's deserving of a platinum award. Will be super interesting to see how the coming days, weeks, and months play out. I'm keeping an eye on the Brent crude futures and will probably go long with calls.

 

[Thunder Good-Oil]

Great post, really appreciate all of this content. If I could gild this post, it's deserving of a platinum award. Will be super interesting to see how the coming days, weeks, and months play out. I'm keeping an eye on the Brent crude futures and will probably go long with calls.

Interesting stuff from a trader's perspective. Personally I'm more of a buy and hold, Peter Lynch kind of an investor. Sometimes I do a little trading, but if I sell 2 dozen times a year it's a lot. I'm also more into fundamentals. I enjoy the technical takes, sometimes they leave me scratching my head a bit.

 

[1972 Grad]

Interesting stuff from a trader's perspective. Personally I'm more of a buy and hold, Peter Lynch kind of an investor. Sometimes I do a little trading, but if I sell 2 dozen times a year it's a lot. I'm also more into fundamentals. I enjoy the technical takes, sometimes they leave me scratching my head a bit.

I'm into the getting rich slow thing.

 

[Thunder Good-Oil]

I'm into the getting rich slow thing.

If I trade in and out now I will pick something that I don't mind keeping for a long time if the price goes the wrong way. I'm horrible at cutting loses and don't like that with stop losses volatility seems to close out the positions at unfavorable prices.

One of the best things that I've ever learned has been to let the winners run if the company is sound. I used to sell if something went up 25-50% only to watch it double a few times after I bail out. Now I tend to keep the good ones.

 

[VolAllen]

If I trade in and out now I will pick something that I don't mind keeping for a long time if the price goes the wrong way. I'm horrible at cutting loses and don't like that with stop losses volatility seems to close out the positions at unfavorable prices.

One of the best things that I've ever learned has been to let the winners run if the company is sound. I used to sell if something went up 25-50% only to watch it double a few times after I bail out. Now I tend to keep the good ones.

After getting burned a couple of times, I now always secure profits. I don’t care if it’s 2% or 50%, if it’s up, I set a stop loss that’s higher than my average. I’ve lost out on some profits, but it’s also saved my @$$ a few times.

 

[Thunder Good-Oil]

I've never tried to set up this trade, but I assume that it's possible on various platforms. Maybe somebody can confirm for me?

Set a stop loss and if it executes it will then trigger a conditional buy order that can be set at an even lower price.

 

[Go aeiou]

After getting burned a couple of times, I now always secure profits. I don’t care if it’s 2% or 50%, if it’s up, I set a stop loss that’s higher than my average. I’ve lost out on some profits, but it’s also saved my @$$ a few times.

You seem to buy stocks that are more volatile than Thunder GO. If you are buying $1 stocks taking profits is likely prudent.

 

[Go aeiou]

Double post

 

[Thunder Good-Oil]

You seem to buy stocks that are more volatile than Thunder GO. If you are buying $1 stocks taking profits is likely prudent.

Oh, I buy all types. Triple leveraged ETFs tend to be pretty volatile. But I been going with better companies over the last couple of years. Should have been doing that 10 or 15 years earlier. Compound growth is your friend. My favorite investments are the ones that now pay annual dividends greater than (or near) the cost of the original investments.

 

[Thunder Good-Oil]

I'll bet that Hedge Funds love the herd mentality of individual investors in stocks that have crashed. I think that most sitting on a loss sell when they get back to even which holds the price down. They fall quickly, but rebound slowly (except for the great names that everybody, fund managers especially, want to own). Personally, I can't stomach going short. I take on enough risk with margin.

An investment that falls 50% has to go up 100% to get back to even.

 

[VolAllen]

I've never tried to set up this trade, but I assume that it's possible on various platforms. Maybe somebody can confirm for me?

Set a stop loss and if it executes it will then trigger a conditional buy order that can be set at an even lower price.

Bingo. I’ll use PRTY as an example.

Crashed from $6 down to 2.40, then to 2, then to 1.60ish. I bought in at 1.80. When it hit 1.95, I set my stop loss to 1.85 to secure some profits. I then set a buy order at 1.65. Just in case it crashed back to the original “bottom”, I’d have secured profits and then had my original amount of shares back but at a lower average. In this case, it never crashed back, so I bump my SL up as the price increases. I believe my current stop is at 2.20. If it hits 2.50 this week, I’ll bump up to 2.35.

I believe this stock hits 3-3.50 before the next earnings. Q4 is typically their best, but I won’t hold through earnings.