The Daily Kill Sheet Picking Off Profits One Stock At A Time!

September 18, 2013

Daily Kill Sheet For September 18,2013

Filed under: Advice,Copper/Gold Mining,Long,Take Profits — Administrator @ 10:46 am

I am closing out my 4/18 long call on Freeport McMoran Copper & Gold (FCX, $33.76) with a 22.9% gain.The May $24 puts that I recommended you sell expired worthless, thus we experienced a 5.4% return on that position as well.

The Daily Kill Sheet has not been updated for a while due to a death in the family. My wife had gotten sick earlier in the year which culminated  in her spending two weeks in intensive care in July, and her death in early August. Given the lack of activity on the blog, please consider all trades prior to March 2013 as closed. New trading ideas will be added regularly from here on out.

May 14, 2013

Daily Kill Sheet For May 14, 2013

Filed under: Advice,Consumer Discretionary,Take Profits — Administrator @ 8:46 am

I am taking profits on my 5/29/12 investment in  Sony Corp. (SNE, $21.61) with a 62.4% gain. The stock is up strongly this morning on news that Daniel Loeb has approached Sony with a letter stating that they should spin-off  part of its Entertainment Business to help raise capital to fix its ailing consumer electronics business. We bought the stock last year when it was trading at about 0.5x book value and my longer-term price target was $18 a share. The stock has easily surpassed that here and it’s time to take profit on the spike. While Loeb may want Sony to spinoff a piece of its business, there is no guarantee that Sony will listen to him. Thus, let’s take profits on the short-term spike.

April 18, 2013

Daily Kill Sheet For April 18, 2013

Filed under: Advice,Copper/Gold Mining,Long,Uncategorized — Administrator @ 9:37 am

Take a look at Freeport McMoran Copper & Gold (FCX, $27.48) for a trade. The company reported first-quarter earnings of $0.68 a share, well below last year’s $0.80 and the consensus estimate of $0.72. Even so, while the numbers weren’t great, the Street was expecting a miss so the news won’t likely come as a shock.

Meanwhile, there are two potential catalysts for the stock here. First, the stock is sitting just above an area of long-term support where the stock has typically stopped falling and has begun to rally. FCX stock is very volatile, and a change in momentum can lead to good gains. Indeed, take note of the recent small gap in the chart below. To fill the gap the stock would have to rise by over 17%. Meanwhile, the stock would have to rise by 35% just to retest its 200-month moving average at $37.81. Big upside from a stock sitting on solid long-term support always makes for a good speculation in my opinion.

Ok, so we have the technical set up, the question becomes “So what is going to send the shares higher from here?” In my mind the catalyst is a fix for the supply/demand imbalance caused by the slowing world economy. A recent mine collapse in the Western United States could be the trigger for that to happen. The Bingham Canyon Mine, recently had a land slide that effectively shut its production. The US is the world’s second largest copper producer and the Bingham Canyon Mine is responsible for about 14% of U.S. production. While the company does not expect any further slides, The department of Mine Safety and Health Administration has not approved the reopening of the mine yet. As of Saturday, there has only been limited activity at the mine…mainly workers removing overburden  from the southeastern portion of the mine (the slide happened in the northeastern wall. All said, while I do expect the mine to reopen in the next couple of weeks, it’s likely that production will be slow to return to normal, thus helping to reduce copper inventories in the near-term and slow to halt the slide in pricing.

Note that the mine collapse happened at a competitor’s mine, thus Freeport‘s production will not be hampered by the slide. The mine where the slide occurred also produced gold, thus the supply of new gold will also be hampered to some extent, also a positive for FCX. With that said, I think FCX shares are poised for a recovery here, driven by stabilizing commodity pricing and strong technical support near the current level. Any increase in the price of copper or gold should also help to boost the shares. My near-term price target for the stock is $32.50, implying an 18.2% gain to my target. My secondary target is $35 (slightly above the 200-day moving average) implying a 27.4% return to my secondary target. For those of you who believe FCX is a good value near the current quote, but doesn’t want the risk of owning the stock here, You can sell May $24 puts at $0.30. If the puts expire worthless in 29 days, you would garner a 5.4% return.


Click On The Graph for a larger Clearer Version.

April 17, 2013

Daily Kill Sheet For April 17, 2013

Filed under: Advice,Industrial,Industrials,Shorts,Take Profits — Administrator @ 10:09 am

I am closing out my short position in Cummins Inc. (CMI, $108.15) for a 6.3% gain. These shares are very volatile, and with the markets beginning to look near-term oversold I want to cover here and look for an entry point after a bounce.

April 16, 2013

Daily Kill Sheet For April 16, 2013

Filed under: Advice,Industrial,Industrials,Shorts,Take Profits — Administrator @ 8:15 am

I am taking profits on two of our short positions here after yesterday’s big decline. With that said, I am closing out our 1/31 short on Kennametal (KMT, $36.17) with a 12.5% gain. I am also closing out my 3/21 short on Parker Hannifin (PH, $85.96) with an 8.5% gain. Both stocks have had solid declines and are trading near our short-term price targets, thus I will take profits off the table here.

March 21, 2013

Daily Kill Sheet For March 21, 2013

Filed under: Industrials,Shorts,Uncategorized — Administrator @ 2:47 pm

Take a look at Parker Hannifin (PH, $93.24) on the short side. This one is a bit of a no brainer. We are going to take advantage of the stock’s seasonal bias coupled with its deteriorating technicals and its weakening fundamentals.

On a fundamental basis, the shares are trading near the higher end of their traditional valuation range even though orders have turned negative across most of their business segments and earnings are down on a year over year basis. Aerospace has been the only segment where sales have remained strong, but with the impact of sequestration still an unknown PH shares at the current quote are a questionable long.

Typically the March to June time frame is a poor time to hold Parker Hannifin shares. Indeed, if you had shorted the stock on March first and bought the shares back at the June low, you would have had a profitable trade in 21 out of the past 27 years. In other words, you would have made money 77.7% of the time. A popular saying is the trend is your friend and in this case it’s your best friend! Indeed, in nine out of the past twenty-seven years having a short over this time frame has garnered a double-digit return. That’s a double-digit return in one out of every three years on average!

On a technical basis, PH shares look over bought and are at a dangerous level on two fronts. To start, the stock is in the process of forming a double top with its April 2011 high. Last time the shares had pulled back nearly 40% in six months after reaching its peak. Parker shares fell through their 50-day moving average today after Goldman Sachs resumed a Sell rating on the shares. Now that that key support level has fallen, there is no real support until about $86 a share, about the mid point of an unfilled gap in its chart from the beginning of January. Typically all gaps get filled at one point or another, thus its a good bet that this one will too. At this juncture, the 200-day moving average sits just below $84 a share. I suspect that fear of weakening orders, coupled with fears about the banking crisis in Europe and the slowing of Asian economies will be enough to push the shares toward their 200-day moving average. With that said, my near-term price target is $84, implying an 11% gain to my target. For the record, the lat decline from the top was halted when the stock hit its long-term 200-period moving average.

March 13, 2013

Daily Kill Sheet For March 13, 2013 – Position Update

Filed under: Long,Sure Shot Update!,Uncategorized — Administrator @ 12:13 pm

Willbros Group (WG, $8.60) has been mentioned positively in a new research report by UBS. The report cites eight stocks that stand to benefit from infrastructure rebuild in the United States and Willbros is one of the stocks mentioned. At this point, we are up 55% since I first wrote up the stock in the January Sure Shot Letter. At this point, I recommend that we continue to Hold the stock here.

March 6, 2013

Daily Kill Sheet For March 6, 2013

Filed under: Industrial,Long,Sure Shot Update!,Uncategorized — Administrator @ 1:29 pm

Just a quick update on our Deep Value position in Willbros Group (WG, $7.10). Willbros announced fourth-quarter earnings of $0.11 a share, $0.05 better than the consensus estimate. Revenues jumped 54% year over year. 

Management noted that their strategy to reduce the impact of seasonality in the businesses during the first and fourth quarters is proving successful as evidenced by improving top line and operating results. 
Willbros reported total backlog from continuing operations of $2.2 billion up approximately 7% from last year.  Twelve month backlog at the end of 2012 was $1.1 billion up over $240 million from December 31, 2011. 
Key objectives in 2013 are to improve operating results and financial flexibility. They intend to improve performance through strengthening project management capabilities, bolstering training programs and adding work with more favorable terms and conditions to backlog. In addition, they expect to further reduce debt to strengthen the balance sheet.
Management now expects annual revenue to range from $1.9 to $2.1 billion, excluding the Hawkeye and Oman businesses, and debt reduction of $50-$100 million by the end of the year. The business model has experienced improved results in the first and fourth quarters year over year and they expect that trend to continue, with the strongest operating results in the second and third quarters.
At this juncture, we are up nearly 30% in the shares since our January recommendation. I recommend to continue to hold the shares here. The company remains well positioned to help build out the infrastructure necessary for the U.S. to continue to increase its oil and natural gas output. Energy security is a focus of this administration and it’s likely that oil and gas production will continue to increase regardless of the U.S. economic environment. With that said, the stock is volatile and with patience you should be able to increase your positions at prices below $6.50.

February 26, 2013

The Daily Kill Sheet For February 26, 2013

Filed under: Industrial,Industrials,Shorts,Take Profits,Uncategorized — Administrator @ 10:03 am

Time to take profits on our 1/25 Caterpillar Inc. (CAT, $88.80) short position. The shares have weakened substantially since reporting earnings on 1/31. Although the consensus estimate has dropped $0.59 a share over the past four weeks, it still remains well above my $6.50 estimate. Looking ahead, I expect estimates for the year to continue to fall. However, the stock is approaching its 200-day moving average and I am expecting a dead-cat bounce here. Thus, we will take a 7.1% return on our short position here and look to reshort the name on a bounce or break below the 200-day moving average.

February 21, 2013

Daily Kill Sheet For February 21, 2013

Filed under: Uncategorized — Administrator @ 11:57 am

Position Update – Safeway Inc. (SWY $23.71)

Safeway reported adjusted fourth-quarter earnings this morning of $0.94 a share, $0.19 better than the consensus estimate. Same-store sales increased 0.8%and marked the third consecutive quarter where the company gained U.S. market share.

We’ve held the stock for about nine months now, and for most of that time the stock has been a laggard. While we are showing a 17.30% overall gain in the position, the market has outpaced us over most of that time period. Even so, I’ve hesitated to sell the shares given that results have beaten my expectations in each of the past three quarters while the stock’s valuation has remained near the lower end of its traditional range. Much of today’s surge came after management noted that its comps were running up about 2% quarter to date, which implies their fastest run rate since 2008.

After today’s surge I am goin to take the money and run, however. Most of our gain in the stock has happened today, and after a big one-day run up stocks have a tendency to take a breather. Thus, we’ll use today’s strength to take profits in this slow-moving value play. While it is encouraging that comps are accelerating, gross margins were down this quarter and an aggressive price strategy will likely put pressure on the gross margin going forward. With that said, I suspect that a lot of today’s strength is short covering, and we are going to take advantage of it here   and take profits of 17.3%.

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