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Weekly SWHC chart
Someone encouraged me to look at the S&W weekly chart, so here it is. Quite honestly, I am tempted to buy some more SWHC puts, or sell some shares short if it comes close to $10.
It is a stock to trade until SWHC has a few positive years of solid earnings.
There was massive money flowing in through 2012 and has been recently coming out. Uptrendline clearly broken, and a new top line established and heading lower.
Hold on, take a step back and think logically....
Two heavy days of volume, and two days in a row, not only Ruger, but Smith and Wesson get sold off... end near lows of days... and you think this is a sign that it will rebound?
Look, I personally could care less what anyone else thinks. I am just sharing my opinion, both as someone who traded in the past, and is currently in financial services industry.
Anyone can make any chart look pretty, it is ultimately up to you to view all of the risks, and all of the challenges and then decide.
I can pick the shittiest company in the world and as long as I only look at the positives, can find reasons to invest.
You need to find all of the negatives out there, and if you can live with then, and explain them, then you can invest.
The Investor Relations people will always paint a rosy picture. Anyone who holds a company long, no matter if they are down 20% or not, are always going to be rosy on a stock. If you do not want to be slaughtered.... you need to view all of the risks.
Especially since anyone with a few million dollars can make S&W stock down a few percent by themselves.
Right now, only one small cap mutual fund that has an active manager owns this. Stuff that makes you go humn.
Don't try to pick the very bottom, the time to invest is when the move is made and trend established.
Edit... just looked at the weekly chart. lol. Wowser. Time to buy more puts.
Why would you think gap up?
First 30 mins of trading really mean nothing anyway, its all about how the stock closes.
Don't get me wrong... I like S&W.... just don't love the stock. lol.
I was just doing some research....
Year Ending $Operating Income $earnings per share
2008 $24mil $.23
2009 $-73mil $-$1.37
2010 $42mil $.56
2011 $-80mil $-1.37
2012 $45 mil $.25
See the trend and issue?
They make money, then next year they lose 3 times as much. They make money then lost twice as much. They make money.... whats next?
Furthermore, their losses per share are much more than the gains.
Ok... a few more issues... and risks.
Part of S&W's popularity has been the M&P 15 sport line.
There is a rising risk of a new assault weapons ban that seeks to ban AR 15 type of rifles... so while it would cause an initial surge, it would stop and prevent a lot of retail sales if it so passed.
We have been in a great atmosphere for guns because there is fear of a ban, but no ban yet. Most gun nuts I know are buying guns left and right, for the fear it may happen.
Don't get me wrong, I like SWHC as a company, and alot of their products, but there is a disconnect between stocks and companies. Lastly, we are not getting paid to hold it. One of my favorite companies to hold long term is the Spanish Bank, Banco Santander... SAN. They are profitable and are just unlucky to be in Spain, so getting sold off, however their profits are secure and best of all, getting paid a 10% or so dividend to wait.
SWHC pays nothing.
In the short term, we will likely have some sort of a bounce, but I would not be at all surprised to see it go back into the $8's in the near future.
Here are Fundamental and Technical Reasons why this stock has more against it in th short term than the long term.....
Technical
1. It has failed on 4 occasions to break out of the 11.24 or so range, including a very good earnigns report.
2. It broke down through the support/trend lines... 2 of them.
3. MACD is reversing, and even had been selling off on positive numbers.
4. Money has been flowing out of the stock for a long time. Last earnings report, money flew in expecting a massive Obama rush, stock popped to $11.00, from there, it sold off to $8.58, and then went up to $11.25 on earnings and Obama reelection... failed to break the high, and now....
5. Closed in the bottom Bollinger Band. IE, sell zone. If it closes in bottom, it is usually a sign to sell, if it closes in the top, a sign to buy. Last time it closed solidly in the bottom SWHC went from around $10 down to $8.58.
Chart on bottom.
Fundamental
1. Institutions who trade this, do not daytrade it or hold it a few days. They bought into it for $3 or $4 a share years ago. They are sitting on massive gains, and are selling it now, before year end to lock in 15% tax rates. No reason for them to buy in until next year.
2. Mutual funds do not look at SWHC and instead buy Ruger for a few reasons.
Ruger has a larger market cap, and a higher stock price. Many mutual funds cannot buy SWHC because most would end up owning the entire company with a 1% investment allocation. SWHC is way too small. Mutual funds want to invest... not own companies.
3. Too many unresolved issues with lawsuits.
4. Debt not paid off.
5. Just became profitable and obviously the street is not buying it. Show us a few years of solid growth.
Right now, on paper SWHC looks like a good company with pretty damn good products... (I am a gun guy. =P ) However.... no one I speak with in the finance community (hedge funds, mutual funds) is looking at SWHC seriously.
At $4 to $5 it is a good speculative investment. We are nearly double those valuations now, and while still attractive at 10 times PE.... SWHC has to prove it with earnings going forward.
I would not risk a significant chunk of change on it, instead I would either do a buy write on this... (buy stock, sell calls against it), or buy some calls, or write some puts.
Disclosure: I own $9 puts on SWHC and have been both long and short it. Was long at $4 for both myself and a few friends and clients.
Extended trading means nothing unless there was game changing news.
Late trading is merely end of day orders and others.
100 share trade can swing the price up and down.
It is way tooo early to say if it held it or not. It was merely cut off by the end of the trading day. Give it another day or so to say if it held or not. Furthermore, look at the previous times, different scenarios. First and foremost, those were in uptrends. Right now the stock is moving sideways and down, with 3 failed atempts to break the highs. The stock was overbought, CMF money is flowing out, and the MACD is reversing down fairly fast.
No no, the loading zone would be around $6 or so.
Keep in mind, the stock went up and down this year, means a ton of gains... institutions will want to capitalize on the lower tax rates this year, which means selling to lock in games. Come back in Jan for new cost basis.
Think with your head, not your emotions.
Never try to catch a falling knife.
From a technical standpoint, it could not break the 11.24 and 11.21 peaks from earlier this year, even on good earnings. Money is still flowing out of the stock.
When the stock sells off so much in one day and ends near the lows.... there is more selling pressure to come.
I am a fan of the products, not yet fan of the stock, until Smith and Wesson can deliver a year or two of solid growth. See if it holds $9.70, if not, next target down is $8.58, if it bounces back and holds a day or so, would buy. Otherwise.... Timber....
This was classic "Buy on Rumor, sell on news"
See, the problem is this....
no one knows how to value Smith and Wesson.... why. Look at their history.
They were profitable, then they made bad aquisitions in order to get into the government contract game. That blew up, they were loosing a ton of money.
That is when the stock sold off into the low single digits.
OBama rush got this stock up.
Right now, is the first time they will be profitable for the year in a long while. So off of that, $1.10 earnings a share supports a $10 or $11 stock price easily, at a 10 time multiple.
The issue is... can you honestly say and believe at S&W will be profitable for the next 10 years?
I can't.
Ruger is trading so well because they did not mess around in other garbage... they sold guns to consumers. Smith & Wesson has their paws in everything, military, police, consumer, pointless accessories, etc.
Got to look at the latest report.... but I believe the sell off due to the fact that they met on earnings, however revenue was higher... yet if revenue beat, so should of the earnings.
What?
Dont quite understand it. If you want to keep the stock, then you can either buy back the calls, or.... roll the calls up and out.
HAHA... Special Dividend when there is not one right now?
While I love my S&W guns, and do not own rugers, RUGER is in far better financial shape. Keep in mind, S&W has not yet been profitable for more than a few quarters.
I would love a dividend, however they need to pay down their high rate debt first.
Why is anyone buying beyond covering shorts?
There is nothing technically sound as for it to go back up.
http://stockcharts.com/h-sc/ui?s=SWHC&p=D&b=3&g=0&id=p96319899005
Look at the chart. It just closed in the bottom bollinger band channel, and a strong signal of it turning south, add in RSI, MACD turning down, and money flowing out....
If you want to buy in.... I would put in a price of $8.50 and pray for a bounce.
Fundamentally there are reasons to own SWHC... but don't try to catch a knife. Wait for it to bounce.
Disclosure... I do own $9 puts. Would go long around $5 or so.
If the market turns, it would be bad for SWHC I feel. SWHC is very much a defensive small cap in a sense. The question is, how much of the Obama rush is already priced in. Beyond that, sensible earnings.
We saw the same thing 4 years ago when he got elected the first time, prices peaked, then slowly went back to the lows over time.
As a gun owner, most of rush was first few days after election, but mostly before then.
I do love SWHC as a company, as a stock... we shall see.
Long term they have fundamentals and opportunity, in the short term, not loving the chart. Was in a down pattern anyway... then the spike due to election, and in short term it was able to sustain it.
Look at the charts, Money has been flowing out of SWHC since August, even with the Obama re-election, it has not broken through the September double top at 11.21 and 11.24.
It has broken through the 50 day moving average support, and looking for it to test the 200 day somewhere around $8 or so.
SWHC is a great trade. Bulls and Bears make money, Pigs get slaughtered. time to sell the news... at the very least, if you are sitting on gains, buy some protective puts.
Well.... Mitt did not win, but DUST is breaking out. I suppose certainty helps... certainty of higher taxes and the market being down 5% since Obama got elected.
Still holding... even though my options got burned last expiration.
Watch for breakout if Mitt Romney wins the election and uncertainty subsides.
Gold looks to be down about .8% pre market. If we have another day or so, gold will likely roll over and take the miners with them.
Nope, where does it trade? Alot of russian stocks are highly undervalued.
Decent recovery today. Was down in the morning but recovered fairly well. Will see in the next few days.
I am afraid we will see the beginning of a short term correction, with SAN closing in the bottom Bollinger bang over the past few closes, the reversing MACD.
Not quite set on cutting any positions, however would look to add if opportunities come up. SAN is a core, long term holding for me.
If I was trading it, I might even be looking to short it.
May pick up some protective puts though.
Got it...
Record date of October 16th,
Instructions to broker by October 26th,
Payment during week of Nov 12th.
Final conversion ratio on October 15th
http://www.santander.com/csgs/Satellite/CFWCSancomQP01/en_GB/Corporate/Shareholders/Shareholders-US/Santander-Scrip-Dividend.html
http://www.santander.com/csgs/Satellite?appID=santander.wc.CFWCSancomQP01&c=DocumentoGS&canal=CSCORP&cid=1278684152922&empr=CFWCSancomQP01&leng=en_GB&pagename=CFWCSancomQP01%2FDocumentoGS%2FDocumentoGSPreview
Something screams to me October 21st, iirc.
Last one I got was 1 new share per 47.
Reminds me to give instructions as well. Options house already screwed me on the dividend once, as they want you to call every time.
As per SAN's disclosure, the default option per Chase is shares... and if you gave instructions before, they should still be good.
But alas.
Santander as a long term core holding.
I must say, working in the financial services industry, and seeing all of the values that were presented during 2007 and 2008, I feel SAN is one of those value options for the long term.
The only thing wrong with SAN is that it is a Spanish bank. Their balance sheet is superb, and still able to cover the dividend with a low percentage of the cash flow.
LOL, STD is was kind of cute. I am sure they did not want to be associated with a Sexually transmitted disease though. =)
Purchased yesterday for $23.87... Playing this two ways, either market correction which will take the gold stocks with it, as well as the, in my opinion, overpriced gold.
May look to get some DUST puts too.
Purchased yesterday for $23.87... Playing this two ways, either market correction which will take the gold stocks with it, as well as the, in my opinion, overpriced gold.
May look to get some DUST puts too.
Actually, it is about the divestment of the security group. Guns is the core business, and as a shooter, saw this a long time coming, ok, at least a few years.
the M&P line of pistols are a terrific value and taking a ton of market share away from Glock.
At most of the big matches, and even local, more and more M&P's are seen in the production gun divisions.
And that is why I loaded up on options today.
Forward PE 38.3
Also, as of last friday, most analysts are still buying. From my handy Morningstar terminal.
Total Number of Analysts: 6
Buy 4
Outperform 1
Hold 3
Underperform 0
Sell 0
Forward PE is actually just under 40. Way in line with the rest of the tech sector. We will see tomorrow if everything is on track.
Look at how many companies are years from profitability but have excessive market caps.
If it was to be sold off, it would of been sold off. What we have been having is a meaningful pullback.
If call is at 8am, I am sure earnings will be out around 7am.
Opening up a whole new can of worms.
In short, two types of options. Calls and Puts, and you can take two positions on them, Write them (sell) or Buy them (buy)
Purchasing options is what most do.
Call = Buying call give you the right (but not obligation) to purchase a specified number of shares, at a specified price, within a specified time frame.
Put = Buying put give you the right (but not obligation) to sell a specified number of shares, at a specified price, within a specified time frame.
Writing options gives the opposite effect.
I suggest you pick up "Options as a Strategic Investment" by Lawrence G. McMillan. It is the bible of options.
How nice when the stock does what the chart was suggesting.
http://stockcharts.com/c-sc/sc?s=SIRI&p=D&b=5&g=0&i=p06694960589&r=6697
You read my mind...
But went a little bit more.... conservative.
Bought a Siri Bullish Call Spread.
Bought 15 Sept $2 Calls
Sold 10 Sept $2.50 Calls
This in addition to all the other long only calls.
This is bouncing right off of the top band, and quite frankly, the options pricing just made it very attractive.
As long as SIRI holds the $2.24/$2.25 and closes above it, this was just an opportunity to buy. If it breaks down and closes below there, will be closing out the spreads.
Covered Call Ideas for this week.
So getting some free time (ok... who am I kidding), so wanted to start up this forum again.
The theme for these are good companies to own, that you can write some premium on, will not be mad if they get called away, and as a bonus, all yield over 5% dividend!
1. STD - Banko Santader
Buy 100 @ 10.28.
Write 1 Sept 2011 @ 11.00 for $.40 premium,
Expected dividend of $.16 per share.
61 days till expiration.
Net cost $1984.95.
Profit if Unchanged $102.15. 5.15%, 30.79% annualized.
Profit if called - $246.15. 12.40%, 74.20% annualized.
Break Even $9.77, 4.97% downside protection.
2. LLY - Ely Lilly
Buy 100 @ 38.33.
Write 1 Sept 2011 @ 39.00 for $.42 premium,
Expected dividend of $.49 per share.
61 days till expiration.
Net cost $3799.95.
Profit if Unchanged $82.05. 2.16%, 23.88% annualized.
Profit if called - $149.05. 3.92%, 43.38% annualized.
Break Even $37.51, 2.14% downside protection.
Some non dividend paying Buy Writes
1. MTL - Mechel Steel
Buy 100 @ 24.73.
Write 1 Aug 2011 @ 25 for $1 premium,
33 days till expiration.
Net cost $2381.95
Profit if Unchanged $91.05. 3.82%, 42.28% annualized.
Profit if called - $118.05. 4.96%, 54.82% annualized.
Break Even $23.82, 3.68% downside protection.
If you are long stock, especially with a low cost basis, I would absolutely hedge my position, or half the position with some $2 or $2.50 puts.
or....
Write some $2 or $1.50 puts. Buy cheap shares, and make extra cash if nothing happens.
And when will it reach $4? You do know it is as likely to hit $3 then sell off back to $1.50 or so before it hits $4, right?
Don't fall in love with any stock, you will get slaughtered. I am still learning that mistake, and lets say I am a professional in this field.
It is not an investment until it becomes cheaper. It is already spec'ed out. If you are working with a broker, ask them to send you their company research on Siri, or morningstar research. Then take basic financial accounting and financial management classes. Look at the ratios and study the company.