BABA

[JBinPA]

Could be headed back to the $85 entry I had proposed; leaps at that point may provide decent entries

 

[JBinPA]

BABA @ 87.5 this morning; patience grasshopper!

 

[njfan47]

Good patience, JB. I can't sell for at least nine months, so I am not worried. I did sell some of my post-IPO shares at $113, but still have some other post-IPO shares and 10 call options ($75 contract) for January 2017. Will probably acquire more January 2017 $75 call options if the stock goes any lower and if the spreads are reasonable.

Synaptics came out with better than expected earnings after the close and was up $8.70 to $77.01 Thursday. Coming back strong and could still be acquired in the next year or so.

Biogen was up $26.75 in the post-market today to $380 after good earnings. It was up $2.07 in the regular session, so it had an overall gain of $28.82 Thursday. Not a bad day!

 

[JBinPA]

BABA kicking around that 85 level; may be time to get long soon!

 

[njfan47]

Another good call, JB. I am getting more respect for your price calls on the high-flying stocks!

Let's hear your thoughts on GoPro. I think it is getting pretty cheap here in the mid-$40's.

 

[JBinPA]

GPRO is definitely a trader in my book; would not marry the stock.

I'd look for an entry around 40 - 41 and be happy.

I didn't look at the expiration dates on lockups so that could drive the price lower; 35-40 depending on the timing.
This post was edited on 2/16 12:10 PM by JBinPA

 

[njfan47]

Sounds good. I think you would be a good floor trader in NY or Philly. Where did you learn chart reading, or were you self taught?

 

[JBinPA]

Thanks NJ, had always wanted to be an investment director; floor trader, I'd sweat too much, not the prettiest of pictures.

Self taught and have a few rules thrown in; such as if I'm going to be wrong of a stock headed down, I want to be wrong late, not early. I can always catch the ride back up once it begins. Too many times I've been early and spend trades trying to dig myself out.

Trade in tranches; I usually do 3. One at my defined entry point, a second if it somehow goes 5% lower and a final one when it clearly has turned north. Selling I try to follow the same guidelines.

Some of my trades are over in days; most are over in weeks and a few in months. With limited capital I try not to tie up all invest able funds but even when fully invested, I'm studying the next 10 potential trades.

Never shoot for the lowest entry nor the highest exit; leave those for someone else to guess at. Only one trader will ever be right on those two prices. Not worth the effort.

 

[njfan47]

Well stated JB. I agree on the idea of buying a quality company stock at a level lower, only I will buy if the stock is down 10% or more, as long as the overall market is healthy; this rule is off the table in a bear market or a market that seems tired.

I had a post for you on the football board asking what the political leaning of the LaSalle administration is and how that impacted Gordon.

 

[JBinPA]

Well, BABA went through that 85 entry level; I'd propose an entry now at $75; Im not sure it tests that opening level of 68 but it's not out of the question.

 

[njfan47]

Good points, JB. They need to get some good news going soon. The next earnings report is still about a month and a half away. And getting thrown out of Taiwan didn't help. Jack Ma needs to manage all of the issues at hand.

Long-term, this is probably a great buying opportunity, but only if one is going to hold for 12-36 months.

Luckily, I did hedge by selling some April 17, 2015 calls, but not enough. The trade is up 60% so far, but I should have gone for at least a 50% hedge.
This post was edited on 3/3 12:21 PM by njfan47

 

[JBinPA]

BABA did test 80 and bounced; I would look for a retest which will most likely fail. Eventually I'd look for a test of the $68 open in the next few weeks unless the Fed throws gas on a fire!

BABA is totally overpriced compared to American companies like Amazon, Ebay, etc.. I don't think that holds up much longer.

 

[JBinPA]

BABA has a lockup expiring today; the additional 330 million shares will roughly double the availability on the market. In conjunction with Fed speak we could see BABA do some wholesale dumping. I would not be tempted to jump in.

There is another 1 million share lockup expiring in May that will further dilute value of shares on the market, though not confirmed yet, I've read there is a lockup in September that dwarts both of these combined.

I would let this one ride for now, I see entries between 60 and 68 down the road; BABA currently trades at $84

 

[njfan47]

JB, on what basis is Alibaba overpriced vs. Amazon?

 

[njfan47]

JB, let's bet $1,000 that Alibaba doesn't hit $68 within the next year.

And I will give you 3/1 odds on a $2,000 bet that it doesn't hit $60 anytime in the next year.

 

[JBinPA]

In my estimation, the sales don't currently support the stock price.

Price to sales ratios are below:

Alibaba: 18 to 1

S&P 500: 1.8 to 1
Amazon: 2 to 1
Ebay: 4 to 1

Ordinarily, an IPO can grow into an inflated multiple but BABA is not your typical, small size, high growth IPO. It is a fairly mature company so attaining the growth required to support that 18 to 1 ratio will be quite difficult in my estimation. Not impossible, just quite difficult.




This post was edited on 3/18 11:14 AM by JBinPA

 

[JBinPA]

Let's just watch it play out; I'm never 1,000% sure of anything so no need to lose my shirt on it. But I think it's all possible.

EDIT: I expect a strong market the remainder of the year so that may float all boats, even this one.
This post was edited on 3/18 11:01 AM by JBinPA

 

[njfan47]

You can't use price to sales to value Alibaba, or anything else for that matter. Before the IPO, in very rough numbers, Alibaba had $8 billion in sales and nearly $4 billion in profits.

Amazon has very small profit margins, while Alibaba has very high profit margins. The two business models are completely different. Amazon builds lots of warehouses and distribution centers while Alibaba is more of a marketplace that takes a commission on goods that pass through its website. They don't have high

Once BABA posts some more good quarterly earnings reports, the stock will again resume its uptrend.

Your definition of mature is up for debate. Mature companies don't grow at 20-30% rates in most cases!

 

[JBinPA]

GPRO hit 37 last week and is below 40 now; look for a retest of the mid 30s.

 

[JBinPA]

I understand not all internet retailers are alike; it's just the best I could do for a comparison. I didn't say the stock is never going up, I just see it setting new lows first. It does have a gap at 100 that will fill sooner or later.

Sustainability of that 30% growth and 50% margins are the keys; both will be more difficult to maintain the larger the company gets.

It hasn't traded above the 20 DMA since mid-January; it's now testing the 20 DMA for the third time this month. The first two times it was rebuffed. I would think the third time they should break through or the downward trend may resume.