Thoughts on Tesla


Anybody who’s ever read The Prime Pick before knows that I am a staunch Tesla, Netflix, Apple, Adobe, and Google bull. Other than Tesla (ticker TSLA), the other five stocks are at all-time highs or very near to it.

Tesla has fallen. There is no getting around that. However, it has also rebounded impressively and has fluctuated about $88.00 in the last month. So with Tesla falling a day before it announces quarterly earnings, I’m sure there are plenty of people questioning the viability of a volatile stock like Tesla.

Let’s go over some facts first:

  • Tesla fell from about $250 to $186 in the end of the year December – January transition.
  • It rebounded from $186 to $200 before starting to wane back to $188. This is when I wanted to buy more Tesla (which would have effectively lowered my average about $25 from where I initially bought it), and it has gone up dramatically since then to $220 after a report from an analyst at Stifel Nicolaus raised Tesla’s stock value to $400.
  • Tesla announces quarterly earnings TOMORROW, February 11, 2015. Before all quarterly earnings, Tesla has fallen quite bit (as have stocks like Netflix). Today is no exception to that. The problem is, Elon Musk already came out and told investors  that sales of Tesla had decreased sharply in China and Asia. With sales in China expected to make up a good chunk of profits for Tesla, the slide began from $250.

What will most likely happen tomorrow:

  • Tesla will continue to fall until after hours when their Q4 earnings are announced.
  • Tesla should announce earnings that are close to or on track with what analysts expect from a healthy Tesla even after the decrease in Chinese car sales. This will restore Tesla to its previous price and should continue to increase its stock price.
  • If Tesla announces poor earnings, then the stock will fall, but not far below the $180 mark we saw previously. Investors have shown that $180 is (give or take), the lowest Tesla should be valued at. If not for their brilliance in Electric Cars, then for their Lithium Ion Giga – Factory that is worth at a minimum of $17 billion – $10 billion less than its Market Cap.

Bottom Line: Tesla is a solid stock, and whether or not it announces dismal quarterly earnings tomorrow, it is still a good buy. It will not go below $180, and is backlogged with car orders until 2016 in the United States. It also has a year over year growth of more than 68%, and is expected to increase much more.

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A Strong Case for Netflix (Ticker: NFLX)

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So I bought Netflix yesterday at 3:52 pm, rushing to sell all my BAC and TSLA stocks to put 90% of my money into NFLX. I’ve written EXTENSIVELY (even when I wasn’t holding Netflix shares) about why it’s such a solid trade. I’ve just finished this study I was working on, and I learned something else from the study, Netflix and Apple are slated to go up so much, that it’s going to blow your mind (Well I think it should be obvious to all of you reading this that both stocks are going to skyrocket after their quarterly earnings reports).

The Facts:

Out of the Last 8 quarterly reports, Netflix has reported a Quartlery Loss twice! The first time I bought Netflix, was at, $88 and osme odd ccents. This was after the stock completely tanked from $300+ to $55. I’m a strong believer in, “The Market will bring back stocks that are vital to the American Household,” and guess what, Netflix is vital to every binge watcher who’s seen House of Cards, to the 6 year old kid who watches Netflix every day after school.

After I bought Netflix, it reported its first quarterly Profit in some 6 quarters. Overnight my shares almost doubled, and it didn’t let up the next day, or day after. The same thing happened (but to a lesser extent) the next time Netflix reported a quarterly earnings, and it has continued for four quarters after that. Oh and guess What? Netflix is Reporting Quarterly Earnings TODAY! That’s why I was scrambling to buy it yesterday at 3:52 pm after maximizing my profits on TSLA and BAC.

https://www.google.com/finance?q=nflx&ei=8dzfUujoM4GJsgez0wE

As you can see from the chart above, Netflix has had PHENOMENAL growth over the last 12 months.

The Problem

Netflix not only depends on this Quarterly Earnings Report to keep its drive alive, it also depends on the Report to make a $12 billion deal with 21st Century Fox. The fact that Netflix has rebounded from the $250.00 drop back to its former glory in just 12 months is also astounding. However, if Netflix doesn’t report a profit, it won’t break the $400.00 threshold, and if it doesn’t break the $400.00 threshold soon, it’s doomed to go back down, even if it doesn’t go to astronomical lows like last time.

The Bottom Line:

Well I trusted enough in Netflix to pull through (as it has for the last 6 quarters, and with the release of hit shows like Orange is the New Black and House of Cards to bring the company back to its former glory.

EDIT: The chart isn’t working so I have attached a link in it’s place. Sorry.

So is Yahoo really back on top? Let’s find out….(Yes it is and here’s why)

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Well first of all WordPress has been having problems including a “Hack-Attack” by the group Anonymous who seized the data of anyone who logged into or viewed WordPress Blogs/Sites after Christmas. This was limited to a few sites, but I just had to make sure. Google rates WP and the Prime Pick with a safe rating again so everything is good now!

Alright so about Yahoo, it’s a big article, so take your time and enjoy…..!

ImageSo this is Yahoo’s (Ticker:YHOO) 1 Year chart since Marissa Mayer took over. Just look at that increase. So what happened? Well first of all I read on  either Seeking Alpha or ValueWalk that some scientists had found out that stocks of company’s with attractive male or female CEO’s saw close to a double in stock price within the first year of the CEO joining. Well I really wouldn’t accredit Yahoo’s amazing success to Marissa Mayer’s looks since she’s only appeared on one issue of Vanity Fair. Rather I would say that she joined a company that is re-entering phase 2 (at least for its stock). Phase 1 was rehabilitation. Image 1.2 (below) will show you the 5 year chart, and that the company was already starting to stabilize and just needed a push.

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Mayer saw how the very top of Google attacked it’s business plan and how it stuck to it ’till the end. Having been about as close to the top job as possible, Mayer helped plan and buy companies that would eventually make Google billions of dollars in revenue. She simply took this abundant knowledge and restructured Yahoo. From personal experience I can tell you Yahoo was already starting to attract younger users and appealed to a wide variety of people. Mayer set in place a very structured FIVE YEAR business plan and started to work Yahoo back into users’ minds. Under Mayer, Yahoo but Tumblr, then other social media sites, bringing their advertising and money making plans to close to a billion users worldwide. 

Yahoo is currently in phase two of it’s stock trend. Phase two is when the stock starts to go upward and starts to go up at a ridiculous pace. This can last for a few month, or even a few years (think Apple, possibly Netflix.)! So this is the time to buy, am I telling you this after Yahoo is gone up over 300%? Yes I am and I’m sorry, but $15.15 to $41.14 isn’t exactly game breaking for a stock that’s going to go up to heights of Google (I can only hope. I correctly predicted to a “T” the month that Apple would fall from its staggering $700.00 stock price. This was because Apple did EXACTLY what it said it would. I am only scared that Yahoo won’t stick to the business plan that it has promised, which would then lose millions billions of dollars for the company. Of course, Google broke its business plan and made a $800 run and is still growing, but Yahoo can’t do that reasonably). 

Last month (December) Yahoo surpassed Google in web searches! That, according to my research, hasn’t been done in almost 6 years! Yahoo is DEFINITELY growing, and I hope that the facts that I have given you (few but true and major) will help you in deciding when to get into Yahoo. I made money on Twitter somehow, despite being a staunch believer that market hype will not make a company that is $-246 million dollars in the hole a profit. I was wrong in that case, but Yahoo has not only Market Hype, but also actual money and revenue coming in from SO MANY sources! And another plus is that it doesn’t (According to its press release 3 months ago), sell your email to 3rd party spammers! 

I’d place a buy order at $40.51 for Yahoo (that should be the safest place for Yahoo to buy), a sell order at $35.29 (the reasoning behind this is that Yahoo does have a chance of falling big before recovering, like Tesla, Netflix, or Apple. In order to prevent massive losses, $38.40 is the widely accepted number, but I disagree because Yahoo has fallen up to eight dollars in a day before recovering to end days in massive gains! That is the lowest it has fallen, so I say six dollars from it’s current price, would be reasonable), and then I’d buy some shares of Yahoo tomorrow at 10:01 am (That is a very calculated time, I’m not even joking.). 

Bottom Line: Yahoo is a slowly growing company that is 1 year into it’s 4 year growth stretch (look at 200 day moving average) and I’d say if you don’t buy it now within the next month, you’d easily be losing $50 – $60 dollars!

UPDATE:

I was examining Yahoo’s charts closely, and I just realized something: A death cross or a Golden Cross occurs every other time the crosses happen. It also happens about every 4 years. By that standards, Yahoo is due for a death cross between 1 1/2 to 2 1/2 years from now because a golden cross has just happened. It may not seem like much, but the price is highest right before the cross occurs! This means that the next time the Cross occurs, if Marissa Mayer’s is able to avert a Death Cross, then we can safely guarantee that Yahoo has entered its second “Golden Age” and then I’d recommend dumping all your money into Yahoo. I’m a day trader, not a long term trader, but for you long term traders, I would buy Yahoo now while it’s super low!

Image Hope I have been able to help at least a little! Enjoy, and invest on!

Ireland refunds EU’s Bail – Regains their Irish Pride

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Well the Irish were smarter than most other countries when they set up their Austerity program. Rather than letting Austerity kill the dying beast, the Irish were able to set up the Austerity so that it was very lenient on them, and helped them grow TREMENDOUSLY. Although Ireland didn’t need much bail-out money, many countries that got it aren’t on track to pay it back for 30 years! Well good job to the Irish, and the Irish President, Michael D. Higgins, stated that unemployment would be at 1.2% in his country by the end of his term!

The Volcker Rule

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Well we all know that America’s international competitors have the clear cut upper hand advantage on American companies for at least the next 10-14 years. Other than that, have you ever actually bothered to learn what’s in the almost 900 page document? An article from NYT explains it clearly and Perfectly. WARNING: You should settle down for a couple of minutes and sit back in your chair if your going to read this, it’s MASSIVE.

When Paul Volcker called for new rules in 2009 to curb risk-taking by banks, and thus avoid making taxpayers liable in the future for the kind of reckless speculation that caused the financial crisis and resulting bailout, he outlined his proposal in a three-page letter to the president.

Last year, when the Dodd-Frank Wall Street Reform and Consumer Protection Act went to Congress, the Volcker Rule that it contained took up 10 pages.

Last week, when the proposed regulations for the Volcker Rule finally emerged for public comment, the text had swelled to 298 pages and was accompanied by more than 1,300 questions about 400 topics.

Wall Street firms have spent countless millions of dollars trying to water down the original Volcker proposal and have succeeded in inserting numerous exemptions. Now they’re claiming it’s too complex to understand and too costly to adopt.

Having read at least some of the proposed regulations — I made it through about five pages before sinking in a sea of acronyms — I can assure you that the banks are right about that. Even the helpful summary prepared by Sullivan & Cromwell, a law firm that represents big banks and that has associates who no doubt wrote the summary over several all-nighters, runs a dense 41 pages.

In numerous interviews this week with people across the political spectrum, I couldn’t find anyone who actually supports this behemoth — including Mr. Volcker, whose name it bears.

“I don’t like it, but there it is,” Mr. Volcker told me in his first public comments on the sprawling proposal.

“I’d write a much simpler bill. I’d love to see a four-page bill that bans proprietary trading and makes the board and chief executive responsible for compliance. And I’d have strong regulators. If the banks didn’t comply with the spirit of the bill, they’d go after them.”

He says he likes the fact that the proposed regulations, complex as they are, make top management and boards responsible for compliance. “If they think it’s too complicated, they have no one to blame but themselves,” he said of the banks.

Do we need to go back to the drawing board?

“Here’s the key word in the rules: ‘exemption,’ ” former Senator Ted Kaufman, Democrat of Delaware, told me. “Let me tell you, as soon as you see that, it’s pronounced ‘loophole.’ That’s what it means in English.” Mr. Kaufman, now teaching at Duke University School of Law, earlier proposed a tougher version of the Volcker Rule, which was voted down in the Senate. “We’ve been through this before,” he said. “I know these folks, these Wall Street guys. I went to school with them. They’re smart as hell. You give them the smallest little hole, and they’ll run through it.”

“I support the concept of the Volcker Rule,” Representative Peter Welch, Democrat of Vermont, said, “but these rules aren’t going to be effective. We’ve taken something simple and made it complex. The fact that it’s 300 pages shows the banks pushing back and having it both ways.”

And these are Democratic critics of the proposed regulations. An overwhelming number of Republicans oppose them, as they have virtually every aspect of Dodd-Frank. Even Senator Richard Shelby, Republican of Alabama, the ranking member of the Senate Committee on Banking, Housing and Urban affairs, who was the lone Republican to support the tougher Brown-Kaufman legislation, dismisses the latest incarnation.

“This proposal, however, is filled with central questions that Congress should have answered before even drafting Dodd-Frank,” said Jonathan Graffeo, a spokesman for Senator Shelby. “Instead, Congress willfully ignored the ramifications of its actions, just as it did in repealing Glass-Steagall.”

Yet the Volcker Rule, or something like it, could be the most important reform measure to emerge from the financial crisis.

If there was any doubt about that, this week the Securities and Exchange Commission unveiled its latest charges involving mortgage-backed securities. In what may be a new low for conduct by a major Wall Street firm in the walk-up to the financial crisis, Citigroup settled charges (without admitting or denying guilt) that it defrauded investors by creating a package of mortgage-backed securities for which it selected a pool of mortgages likely to default, bet against the security for the bank’s benefit by shorting it and then foisted it off on unwitting investors without disclosing any of this.

According to the S.E.C., one trader characterized this particular security in an all-too-candid e-mail as “possibly the best short EVER!”

Compared with this, Goldman Sachs mortgage traders look like Boy Scouts. In settling its fraud charges for $550 million last year, Goldman was accused by the S.E.C. of being the middleman in a similar deal, allowing the hedge fund manager John Paulson to help choose the mortgages and then bet against them without disclosing this to the other parties.

Citigroup dispensed with a Paulson figure altogether, grabbing those lucrative roles for itself. The S.E.C. said Citigroup earned fees of $34 million on this travesty and generated net profits of at least $126 million. (In a statement, Citigroup said it was pleased to put the matter behind it and has since “returned to the basics of banking.”) Nonetheless, Citigroup is paying just $285 million to settle the charges, and, needless to say, its chief executive at the time the deal was marketed and closed, Charles Prince, will pay nothing.  

I asked an S.E.C. enforcement lawyer if he could assure me that a transaction so brazenly fraudulent — not to mention risky, since a naked short ranks at or near the top of high-risk strategies — would be unambiguously prohibited under the proposed Volcker regulations. “There are some tricky definitions in there,” he said. “Could this be interpreted as hedging? But this was a naked short by the bank, and I believe it would be prohibited.”

I found this less than reassuring, since you can bet that if there was a way to call it hedging, lawyers would find it, and at the very least, years of costly litigation would result.

Last week I stopped by to see the financier Henry Kaufman, a former managing director of Salomon Brothers, a former Lehman Brothers board member and author of “The Road to Financial Reformation” (and no relation to Ted Kaufman, the former senator), who has been arguing for years that the proposed Volcker Rule doesn’t go far enough.

“Nobody listened,” he said. Mr. Kaufman has witnessed, by his count, 15 major financial crises since he and his family fled the Nazis when he was 10 years old. 

“Paul Volcker and I are the same age,” 84, he observed. “Paul wanted to take an aspect of risk-taking out of the financial conglomerates. That’s a worthy endeavor. But the history of regulation shows that the private sector pushes back and waters it down. Dodd-Frank didn’t want to address the longer-term consequences of ‘too big to fail.’ The 10 largest banks held 10 percent of the assets in 1990; today they control over 70 percent. This trend accelerated in 2008. The ‘too big to fail’ got even bigger.”

“My view is that we should break up the big financial conglomerates and separate investment banking,” he continued. “Otherwise we’re going to have ongoing government intervention in the credit allocation process. That threatens economic democracy, and the U.S. is the last bastion of economic democracy.”  

Financial concentration also worries Congressman Welch, who has called for an antitrust investigation into whether big banks recently colluded to charge debit card fees. “We need a strong financial sector,” he said. “But it should be in service to the real economy, the productive economy. The large banks have become trading platforms. They make the real money on the trading desks. The depositors, the consumers, become a base to fund that trading activity. There should be a separation and there certainly should not be a taxpayer backstop for their losses. Contrast this to the Main Street banks facing severe pressures from the big banks. Their model is more traditional, in service to the productive economy. In Washington the debate is about the needs of the large banks, but there’s no debate about the basic function of these banks. Do we want the financial sector to be in the service of the producing economy, or vice versa? It’s time we call the question.”

Former Senator Kaufman, Congressman Welch and Mr. Kaufman are all part of a chorus calling for a return to the separation of commercial and investment banking once embodied in the Depression-era Glass-Steagall Act, which was repealed in 1999.

“The need for 300 pages of rules just shows you’re trying to define something indefinable,” Mr. Kaufman said. “I think Paul Volcker is great, but let’s step back and ask, why are we doing this? We‘re doing this because we don’t want banks with federal deposit insurance to be involved in risky investments. There’s a simple solution. We didn’t have that problem for over 60 years because we had Glass-Steagall. It worked, we changed it and guess what, we got into trouble. I want to go back to what worked for 60 years. That’s a very conservative position.”

 Critics of a return to Glass-Steagall note that Lehman Brothers was an investment bank, and Glass-Steagall would not have prevented its failure. Goldman Sachs and Morgan Stanley were investment banks (and would probably be so again), and yet they were still too big to fail.

Mr. Volcker said that reinstating Glass-Steagall was unrealistic in today’s political climate. “It was a magnificent piece of legislation that didn’t need any regulations,” he said. “Do you think they could rewrite Glass-Steagall today without 300 pages?”

Even if Glass-Steagall isn’t a panacea, it would be a start. It would put a firewall around federally insured institutions, protecting taxpayers and helping contain the crisis as well as potential future ones.

“I don’t know if this Congress will address this,” Ted Kaufman said. “I won’t try to forecast. But I believe from the bottom of my being that we’ll eventually have to restore Glass-Steagall. The only question is, How much agony do we have to go through before we do it? We know the solution, but do we have the will?”

In the meantime, “It scares the hell out of me. We can’t afford to have this happen again.”

T.Rowe Says Invest With Caution in 2014


I am on the other side of T. Rowe Price on this one. Although I agree many stock giants (especially stocks trading on NASDAQ) are overpriced, I think that the market is gradually fixing the overvaluation by itself (like how markets tend to do). I am posting this so that you guys can get other people’s perspectives, but honestly, and you can put me on the record as saying this first, but they’re wrong! Markets and stocks will go up easily and you can invest just as carefree as if you were investing in 2007. (Alright so maybe not that bad…)

Invest with caution was the theme of T. Rowe Price’s annual Investment and Economic Outlook briefing in New York today.

With equity valuations at, or above, long-term averages, the mutual fund giant’s experts stressed that investors need to be careful. At 57 months, the bull market has officially hit middle age. And you can be sure the next five years aren’t going to look like the previous five, during which the S&P 500 Index rocketed 164%.

“Risk/reward is more balanced, and we should be risk aware,” said Bill Stromberg, the Baltimore firm’s head of equity. “Investors are finally rotating back to equities and may be too late.”

Stromberg said signs of speculative excess are appearing with margin debt on the New York Stock Exchange passing $400 billion, more than the peaks in 2000 and 2007. Still, U.S. stocks could move higher it they “truly regain favor with investors. Favor…

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Why Tesla (Ticker: TSLA)

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Tesla soared TWENTY DOLLARS ($20.53 actually) when investigators in Germany said that there was absolutely NO problem with Tesla. The investigators also continued to give out praise for the automaker saying that they had never inspected a car as safe yet as amazing a ride as the Tesla. Coming from people in the Autobahn capitol of the world, I’d think that the $20.53 jump is well justified, and Salesforce ads just helped Tesla. Remember, it is widely known now that Tesla is a buy and hold, but I’d honestly sell before the American report is out. Why? Because Elon Musk is South African, not American (and as much as I hate to say this), the last time a non-american took on the highly competitive Americans (I’m American so I have no idea why I’m referring to America as foreign country…), he lost. Think about it, Nikolov Tesla, the man who’s name is now remembered almost 150 – 200 years later as the name of Tesla’s car brand, also took on America. In particular, he took on Thomas Edison and the light bulb. Although Tesla applied for a patent 16 months before Edison had, Edison was given the patent. Tesla’s light bulb’s were safer and more efficient, but he was Russian, not American. I realize that this is a conspiracy theory, but history repeats itself. The inventor of the original Paper clip was German, but the American who applied for the patent won it. Same with the creator of the airplane. I’m not sure what his name was, he was French, but he was quickly shot down by the Americans. I completely wandered off on a tangent here, but history tends to repeat itself, and I think that it is going to repeat itself for Tesla, and ultimately drive the stock back to where it was last week, $106.26.

 

Well that’s the PrimePick for today, enjoy, and comment on what you think is going to happen to TESLA.

Perfect Penny Stocks

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I felt like this just had to be shared. DSNY (Destiny Media Technologies Inc.) and FRMC (Formcap Corp) are perfect buys. Although some say the ship has sailed for DSNY (soaring 16% today), I couldn’t agree less. Most penny stocks (i.e. GOFF, PWEI, XUII) have an initial day where they soar, then the following days they stagnate a little, then around 3 trading days later they soar and keep it up. Both DSNY (gaining close to 50 cents today), and FRMC (gaining 12 cents on the day) are in this initial first day trend. Tomorrow it should stagnate (you should buy them tomorrow around 11 am). Just thought that this might help some of you Penny Stock Traders!