3SOF

1. Introduction

Quote from: njshiva on March 01, 2007, 10:42:04 AM

David, can you please look at CAAS if it is a good short candidate?
I see lot of dilution and rev growth is not that impressive

Thanks

2. Technical analysis
2.1. Long term chart



Over the long term this stock has been trading sideways inside of a giant symmetrical pattern. It has been going south now.

2.2. Short term chart



The short term trend on CAAS is bearish.

3. Fundamental analysis
3.1. Market Cap & Business Description

Market cap is $200 M. The Company is a holding company and has no significant business operations or assets other than its interest in Great Genesis Holding Limited. Through Genesis, the Company manufactures power steering systems and other component parts for automobiles.

3.2. Share count evolution

I don't see significant dilution over the years. Also not on a quarterly basis.

3.3. Balance sheet analysis

Balance sheet is a bit weak but not terribly so.

3.4. Revenues

Revenues were growing modestly in 2004 and 2005, but they just fell in Q3 2006. Perhaps that explains why the stock is turning bearish.

3.5. Earnings

EPS is expected to come in at $0.22 in 2006 and $0.33 in 2007. The trailing earnings multiple is 39.5 and the forward multiple (but maybe the company will fail to meet expectations), is 26.5.

It looks expensive when compared to its industry peers.

4. General Overview

I guess this would be a somewhat risky short because the company is small so it can change a lot. I'm negative on it due to macroeconomic reasons, not specific company reasons.

I would prefer to short stocks that should go down even if I'm wrong in my general market assessment.

5. Rating

Negative.

This analysis was written by David Randolph from www.3stocksonfire.org after a very brief study. He might have missed several important issues about the stock that you may add to this message board and complete the analysis. David makes 10 new analysis per trading day on www.3stocksonfire.org member's request. He already covered 250+ stocks which you can find on the Stocks Covered List. This effort is also a way to find very attractive picks for the 3 Stocks on Fire Portfolio, a very concentrated Portfolio with the objective of turning $15,000 into $150,000 using small cap momentum+value stocks. To know more please read the 3 Stocks on Fire Portfolio FAQ. To receive our newsletter, be able to write on the message board and vote on polls, all you need to go through is a free 10 second registration process.

David, I have a feeling that the market is going to end positive today and maybe even erase the 4% or so decline by the end of the week.  In fact, SP just went green as I write this.  At what point would you have to change your mind and become a bull again?

David, what do you think about ARM as a short? Thanks!

David, what do you think of QID?

I shorted GTRC, Guitar Center, not sure how an outlet store for guitars can have over a 1B market cap, its PE is way too high...

1. Introduction

Quote from: labatts6254 on March 01, 2007, 10:32:07 AM
How about AUY, AIG, and SLW.

Let me start by SLW.

2. Technical analysis
2.1. Long term chart



SLW's long term chart resembles the $Silver chart. I guess the stock has spent the last 14 months or so consolidating the previous big bull run. Is it ready to breakout the $12 resistance level on the upside?

2.2. Short term chart



Over the short term the stock in fact sold off on Tuesday's general market decline, so $Silver doesn't look to be ready yet to be a contrarian or inverse play as you wish. Maybe I'm early (or just wrong, but I don't think so).

3. Fundamental analysis
3.1. Market Cap & Business Description

Market cap is $2.2 B. Mining company with 100% of its revenue from silver production. It is actively pursuing further growth opportunities either by way of entering into long-term silver purchase contracts or by acquiring silver exploration, development or production assets.

3.2. Share count evolution

There has been dilution over the last 5 quarters. Not good.

3.3. Balance sheet analysis

Balance sheet is Ok, but "small", if you know what I mean. Book value is just $617 M, for a $2.2 B market cap.

3.4. Revenues

I see that net profit margin is very high, at 54%. It seems they're very efficient at mining or something. Revenue declined a bit in Q3 2006.

3.5. Earnings

EPS is expected at $0.52 in 2006 and to decline in 2007 to $0.44. I guess these analysts are pricing in a decline in the $silver price. I think they're wrong.

The trailing earnings multiple is 19.

3.6. Recent News

• Silver Wheaton 4Q Profit Balloons
AP (Tue, Feb 20)

4. General Overview

The stock looks somewhat interesting, but I guess this isn't the right way to look at it. I can't tell the potential of the company with this analysis. It depends on the reserves those mines have and the estimated silver price.

I guess that now that the company is posting profits it will stop diluting shareholder's value (it didn't do it over the past 2 quarters) and I'm attracted to the very high net profit margin. It means that if $silver goes up, EPS will rise by a lot. There's a lot of leverage in this stock.

But for now I see the markets down but Gold and Silver not up yet (but not down as much), so maybe my thinking on this macro play is early, and a man can suffer as much from being wrong than from being early (they're almost the same thing).

I'll start looking for a model to evaluate mining companies, I wonder if Michael has some of that ... for now I'm neutral on SLW (but a long term bull on $silver, that is why I own SLV).

5. Rating

Neutral.

This analysis was written by David Randolph from www.3stocksonfire.org after a very brief study. He might have missed several important issues about the stock that you may add to this message board and complete the analysis. David makes 10 new analysis per trading day on www.3stocksonfire.org member's request. He already covered 250+ stocks which you can find on the Stocks Covered List. This effort is also a way to find very attractive picks for the 3 Stocks on Fire Portfolio, a very concentrated Portfolio with the objective of turning $15,000 into $150,000 using small cap momentum+value stocks. To know more please read the 3 Stocks on Fire Portfolio FAQ. To receive our newsletter, be able to write on the message board and vote on polls, all you need to go through is a free 10 second registration process.

Hey David, I was wondering what your take is on RBY?

Rubicon Minerals Corp.

Quote from: buddjas1 on March 01, 2007, 11:33:22 AM
David, I have a feeling that the market is going to end positive today and maybe even erase the 4% or so decline by the end of the week.  In fact, SP just went green as I write this.  At what point would you have to change your mind and become a bull again?

buddjas1, you will have that feeling all the way down, it's a very natural thing

That is a very good and useful question. My take is the market, the most prominent leading indicator, gave a clear negative sign for the global economy on Tuesday. In my view there are very good reasons why such an economic downturn would happen.

But, if the market starts rising and makes new highs, then I'll have to concede I was wrong, or at least early (which is the same as being wrong).

If I'm right I'll be short all the way down until I see in reality what my suspicion is today: a full blown worldwide economic recession (not the end of the world, in fact, quite a natural thing to happen from time to time).   

TFSM is on Bear fire today.  

Yesterday sent a profit warning.

David you will like to short this one: Shares Dilution, negative EPS in the last couple of years....

Quote from: Se7en on March 01, 2007, 11:44:14 AM
David, what do you think of QID?

Well Se7en, I'm holding QID on the 3 Stocks on Fire Portfolio as you probably know, so I believe it will rise over time, as the Nasdaq will decline.

But, it will be a very bumpy ride, bear markets are a lot more volatile than bull markets. Also a lot faster and steeper, despite the constant rebounds and short squeezes.

I admit I said bad things about this product, and I maintain that it could go to zero and people could have had margin calls holding it. That if the bull market had continued further.

Good luck

Watanabe (Japan's Finance Minister) has stated that the unwinding of the Yen carry trade has yet to begin in earnest.   

Probably not a lot of people even understand the Yen carry trade yet,  but its worth learning about.  I posted a bit about it earlier today.

Turns out that many of these players were heavily levered as well, I didnt even realize this.  This is the main conduit for a lot of the volatility we are seeing it seems. 

Chinas market drop caused the Yen to rise, giving margin calls to the levered players in the Yen carry trade, who in turn had to retract their foreign investments...

gold stocks   SA  KGC DROOY KRY

silver Stocks    FRI.V   MSV.T

dave i think china is due for a meltdown. i like the BIDU short. is there any other chinese stocks that are good shorts besides BIDU?

For now Gold & Silver are still not responding to the macroeconomic call I'm making. I guess I'm seeing too far ahead into the future, and only when the FED cuts rates will Gold & Silver breakout to new highs.

Anyway, I don't think they will go down by much, just go sideways over the next few months. So maybe too early to start researching those stocks.

The appropriate course of action now seems to be "short overvalued" stocks. Also short economic sensitive stocks. High beta stocks.

I want to make some quick tests on short candidates. You know, it isn't a problem to short the stock a bit later in the decline (preferably after a rebound - the inverse of buying the dips), because, let's see:

Imagine stock XYZ is trading at $10 and you think it will go down to $3. You plan to buy to cover at $4. If you short it right at $10, you'll make 60% on your trade. But if you short it at $8, perhaps with more certainty that the market agrees with you, you'll make a 50% profit when buying to cover at $4. So, not all that different, just 10 percentage points.

If it were the opposite, that is, a stock that you think will go up from $3 to $10, you plan to sell at $9. If you buy it at $4, you'll make 125% profit. If instead you buy it just at $6 (the same two dollar difference as in the shorting example), you'll make just 50% on your money, so, there was a 75 percentage point difference on the outcome, which is a lot.

Because of this vital difference between shorting and "longing" I believe there's plenty of time to find the right candidates for those 50% profit trades. One doesn't have to short near the top.

I'll have a coffee break now, see ya

Quote from: David Randolph on March 01, 2007, 12:16:57 PM

Quote from: Se7en on March 01, 2007, 11:44:14 AM
David, what do you think of QID?

Well Se7en, I'm holding QID on the 3 Stocks on Fire Portfolio as you probably know...

First I thought it was there, checked it but overlooked it, that's why I asked it here!  
I bought QID @ 54.65$!