Traders Corner   19 comments

With the Federal Reserve Open Market Committee meeting minutes (from the June 19th meeting) coming out tomorrow, and Fed Chairman Ben Bernanke speaking after the markets close tomorrow, don’t expect much today. Any huge market moves today will be suspicious, and likely short-lived.

The S&P 500 levels to watch today:

UPSIDE: 1644 (July 8th’s high), 1654 (June’s high), and 1658 (top of the Bollinger Bands).
LAST CLOSE: 1640.
DOWNSIDE: 1634 (July 8th’s low), 1632 (July 5th’s high), 1622-1626 (9 data points and the 50 day moving average), 1618 (July 3rd’s high), 1617 (20 day moving average), 1614 (July 5th’s low), 1606-1610 (2 data points and the 10 day moving average), 1604 (July 3rd’s low), 1597 (April’s high), 1581 (May’s low), 1576 (bottom of the Bollinger Bands), 1572 (March’s high), 1560 (June’s low), 1536 (April’s low), 1530 (February’s high), and 1514 (200 day moving average).

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19 responses to “Traders Corner

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  1. YHOO is hot. Ed, do you see more upside to YHOO?

    • My sell price is currently $160 over several years (maybe not even then, since that would imply that Marissa Mayer will be as successful as I think she’ll be). The only way I sell sooner is if it gets too hot too fast.

      I am actually tempted to move it into my 401k, since this one will take some patience.

  2. I added on the margin to my positions in BBEP, INTC and RIG.

    • I am eyeballing INTC now. I want it below $23, preferably closer to $22, because I see it reversing there. Regardless, buying it now is not a bad deal at all.

  3. Marshall, how safe do you believe BBEP’s dividend is?

  4. Tom – I did not focus on that with BBEP. My view was that I ought them at 80 to 85% of book value. They have steadily increased dividend and price of oil is highest in eighteen months. But I have to admit the accounting on the dcfs of some of these MLPs s beyond my knowledge. Does anyone else have a view?

    • Marshall,
      I like to use KMP as the “standard” for evaluating MLP’s. BBEP’s financials are a mess compared to KMP. Even though KMP’s dividend payout ratio is high, they also generate plenty of levered free cash flow, compared to BBEP’s bleeding cash. KMP’s dividend may be a “boring” 6.1% compared to BBEP, and you will pay a premium to get it (KMP is not cheap for value), but you won’t be looking over your shoulder for the exit any time soon.

      • Ed – you may be right about KMP. But the attractiveness of BBEP is that I got them at a 30% discount to their 52 week high due to sell off related to LINE. KMP is only about 8% from 52 week high. So I believe BBEP at my price provides a certain margin of safety. Also, BBEP was a favorite holding of Seth Klarman for a stretch and I have confidence he performed proper due diligence.

      • Marshall, after re-reading my post, I was a bit harsh there. My apologies.

        You’re playing a bargain, and that’s always a good thing.

      • Thanks for the great pick Marshall! It is the best I have on my list.

  5. What do people think about Barnes and noble? Barron’s has argued for past year that the sum of the parts is worth way more than market cap. CEO stepping down definitely opens the door to breaking them up into retail and digital.

    • My daughter loves it?

      Truth be told, I’m surprised at that question from you. The current book value/share is less than it’s selling for, and this is in a dying industry, and I don’t see anything that could save the company. If BKS was selling for $5, I might be interested, but at $18, I’d call it a huge shorting opportunity.

    • Barnes and noble want be around much longer as a brick and mortar store IMO. Amazon has set there goals at killing all computation.

  6. Ed – while book sales are in decline, I think Barnes and nobles has a future on the retail side and college bookstores given exodus of borders. If you look at their year end financials, their EBITDA for bookstores was a respectable 374m. For college stores it was 111m. It was the nook at -475m that is bleeding them. If you could remove that in one swell foop, you would have a company with an enterprise value of just under a billion generating over 400m of EBITDA. That is a ratio under 2.5 which is cheap by any standard. I am going to keep a close eye on BKS.

    • Marshall,
      I wouldn’t bet on college bookstores either. Considering our government already is on the hook for $1 trillion in student debt, and that number just keeps growing, plus they just raised the interest rates on student loans, I wouldn’t look at any business reliant on colleges for growth, or even stability.

      On top of that, the popularity of tablets in education might lead to online booksellers like Amazon stealing more business from Barnes.

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