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Category Archives: Analyst

NASDAQ Hacked!

It has being reported that some hackers have made it into the NASDAQ network which runs the stock market. But nothing to be alarmed they never got to the actual execution part of the system. For usual broker and trader this is quite upsetting news but after working with these types of systems for over 2 years I would say it isn’t too much to worry about.

Most exchanges run on piece of software that is quite unique to its own execution algorithms. Furthermore their gateway to the outside world is defined by a particular protocol such as FIX or ITCH or any other proprietary methods. So even if the hacker do reach in through the firewall and into the system, in order to create a real trading impact they have to talk in the particular protocol which is only limited to the trading activities. You may argue that they could shut down the system but most system run on Unix or Tandem machines so this is not too easy to deal with.  What about listening to the wire transmission and getting information? Well then you need to understand the execution logic and build up the order book by yourself. So this won’t be a simple smash and grab at all. Therefore I am not surprised that the hackers just went in to show that they could break in not because they could make some money.

Let it be green!

I’m all for the environment. Reduce, Reuse and Recycle. I sometimes think myself to be going overboard with the idea when I notice that I focus on the amount of gas burnt by vehicle rather than the attractive lady driving it. I was overjoyed to see the shift in the american automobile manufactures towards a greener more efficient engines. My ideal car would be a green vehicle; A simple conversion from electricity to mechanical energy.

The Obama administration is all out for the greener future. Their effort to put 1 million electrical cars on the road by 2015 which is quite possible. So the administration has proposed a plan to give $7500 discount directly for the customers on the spot. There are existing tax credits  between $2500 and $7500 which are only can be claimed after the tax credits come in. So in this effort the dealers and the finance companies can claim the tax credit for themselves and pass on the credit to the consumers directly. This looks really good for the consumers but the dealers remains skeptic after “Cash for Clunkers” programs.

With the sales of Chevy Volt and Nissan Leaf going well the future looks good for the green cars. GM CEO also promised to build a $7500 cheaper Volt which is definitely going to help. From a fundamental point of view this is a good buy.

Tech and Telecom Weekly Snapshot

Tech earnings started the week off nicely with a beat form TXN.  Texas Instruments posted Q3 revenue of $3.74 billion and profits of 71 cents a share, edging the Street consensus at $3.69 billion and 69 cents. For Q4, the chip company sees revenue falling back to a range of $3.36 billion to $3.64 billion, with profits of 59-67 cents, about in line with the Street at $3.51 billion and 63 cents.

Important News to Keep an Eye on this Week:
Visa – Is going into Wednesday earnings with some momentum as the shares were up 2.0% last week and have felt solid for the last few weeks. Janney has much of the headwinds are priced into their models but feels there is a chance credit volumes come in better than expected. First Data’s (private) September SpendTrend data showed a slowdown in PIN volume, which the firm attributed to a possible increase in negative authorizations for PIN-transactions at the point of sale. This could be due to new bank rules that resulted in fewer consumers opting in for overdraft protection.

HPQ -  Keep an eye on HPQ shares this week following the release of the Slate, HP’s tablet. HPQ commited to Windows 7 for the first tablet but the chatter is that the really story will be the WebOS based tablet that analysts expect in the Spring of 2011.

Adobe – The Adobe Max, the company’s annual user conference, which started Saturday in LA sent RIMM soaring today as Co-CEO Mike Lazaridis demonstrated that the Playbook, actually worked.  Lazaridis also announced that the Playbook would work with Adobe Flash, which will make developers happy.  The conference will end on Wednesday when analysts expect management to reiterate guidance for F4Q, to give indications of how the recent release of Acrobat X has performed to date, and to give greater insights into the company’s strategies to handle the Flash/iPad situation, to address weakness in the Japanese and education markets, and to move more services into the Cloud.

MSFT – Microsoft will be out Thursday after the bell and analysts are expecting a modest beat.  Analysts will also be keying on commentary regarding the plans for mobile phones, tablets, gaming, and cloud computing.

14 Day RSI

Overbought: DELL, XRX, STX, GOOG, SNE.

Oversold: MOT, ERTS

Technology Review: 10-19-2010

Tech and the NASDAQ got beaten up early today on the heels on Apple and IBM’s weakness following yesterday’s earnings.   The XLK, which is the technology ETF closed just off the lows at 23.82 down 1.77% while the SMH’s, the semiconductor ETF closed almost 2% off the lows at 27.94, down 1.2%.   The NASDAQ and Technology actually hung in relative to the S&P 500 and bank’s as they didn’t make a new low when the S&P flushed following the BofA news.

For more on tech, CREE reported Q1 results at the end of the day of $0.60 cents per share better than the estimate of $0.58 and Revenue’s of $268.4 mln, slightly worse than the $277.68 mln expected. Cree also reported Q1 gross margins of 48.6% vs Street est of 48.4%.  The company issued downside guidance for Q2, seeing EPS of $0.56-0.60 vs. $0.60 consensus and Q2 revs of $270-280 mln vs. $297.04 mln consensus.

CREE immediately traded down about 10% after hours before getting a bounce back to $48.50.  Expectations for the earnings were not high, analysts were expecting inline Q1 numbers and lower guidance.  While EPS was slightly better but rev’s were pretty light, inventories also rose and while guidance was expected to be light it seems like most were hoping for CREE to keep it inline.  Inventories also continued to weaken and overall the quarter and outlook are soft.

Last quarter the company posted a similar quarter and the stock gapped down eight points, then proceeded to bleed lower over the next moth until it bottomed at 47.30 which was a 30% decline from the earnings date.  While I don’t see a 30% decline in store for this pullback CREE is slowly becoming a binary trade.  LED lighting will either become mainstream, which I believe is highly probable, and analyst price targets of $80 - $112 are in store or LED’s will fail to gain traction and CREE will bleed it’s way loer for some time to come.

Technology Review: 10-12-10

Tech was nice and strong today as it led the S&P 500 to the highest levels in since the late April highs.  Apple and Google both showed strength out of the gate and with Apple reaching all time highs it seems we’ll see 300 tomorrow.

The Hardware names were strong across the board and an announcement from Lee Ainslie late in the day spiked DELL.  Ainslie in a speech in downtown NYC said that Michael Dell could be looking to his company private and the stock rallied up to 14.14 but couldn’t hold gains and closed the day at $13.92. Ainslie also said that tech stocks including ADBE, CSCO, DEKK, HPQ, IBM, INTC, and MSFT are great value plays providing a high free cash flow yield of 12% in 2010 and 13% in 2011.  Ainslie also said tech names are attractive because of the weaker dollar.  The weaker dollar can help U.S. companies export and many tech companies already earn half or more of their revenues overseas.

Moving into the cloud names, CTXS, AKAM, CTXS, and RHT all had a nice bid to them throughout the day.  No direct news but it seemed like people could be covering after another brutal day Monday.  Although, there did feel like there was some real buying in this space today and it will be interesting to see if we can get any follow through tomorrow, being today was the first decent day since EQIX took down their numbers.

Semis were solid today as the  SMH’s closed up 63 basis points.  ALTR, NVDA, SNDK, NVLS, MRVL, and NETL all traded well today but LLTC and INTC will set the tone for tomorrow.

LED stocks were weak today as RBCN was off 8% and CREE closed down about 1.6%.  Sterne Agee had negative commentary out regarding RBCN and GE commented that LED pricing was very aggressive.  TV sales figures over Golden Weak missed expectations.


Worst Performers: MOT, ERTS, FSLR, PAYX, MA, TXN

3D TV Manufacturers Await… Heat vs. Knicks Game?

December 17, 2010.  Mark your calendars, folks, because on this day an NBA game will be broadcast for the first time ever in 3D.  That’s right, 3D.  The Heat vs. Knicks game will be broadcast on ESPN’s 3D network.  For this set up to be possible, special equipment used in 3D filming will need to be brought in to NYC’s MSG (where the game will be held).  ESPN launched its 3D network in June of this year and is carried by DirecTV (DTV), Comcast (CMCSA), AT&T (T), and pretty soon Time Warner (TWC).  The channel currently broadcasts about one live sporting event per week.

The topic of the future of 3D movies/TVs has been one that our desk has been talking about since earlier this year.  I am still of the opinion that we are lightyears (okay, maybe a tad bit of an exaggeration there) away from consumers truly being able to adopt the 3D TV culture.  See my previous blog on the 3D Craze here.  Simply put, we are not ready to embrace this technology as we are still not over the previous generation of TVs (HD) and also because the 3D technology itself is not yet fully developed.  The whole issue with having to wear bulky, not to mention expensive, glasses in your home might seem to be mitigated by the advent of TVs that will no longer require glasses in order to view 3D content.  However, that technology is still in its infancy stage.  For example, Toshiba recently announced its 3D TVs, which can be viewed without glasses; however, did anyone point out that the panel displays are only 12-20 inches?  Unheard of in this day and age of “I have a bigger TV than my neighbor.”

It looks like manufacturers of 3D TVs are banking on sports to help spur this technology.  Is there hope?  The Nielsen company released a report last month showing that among those who had never watched a 3D TV before, 25% were “very likely” to buy one; meanwhile, among those who had watched a 3D TV, about 13% were “very likely” to buy one.  These stats suggest that consumers are not that impressed by 3D TV.  Also, if manufacturers are banking on sports, they may have to think again.  3D filming is quite a tricky technique.  It is mostly about angling and when it comes to sports like basketball, low angles provide the best shots.  Unfortunately, achieving these shooting angles is not so easy at active events like sports games where players and refs are running to and fro.  Perhaps December 17 will be an important date for 3D TV companies to further tell how close the world is to embracing this new technology.

Equinix and Hedge Fund LIVE

Let me start by saying that I am not a technology analyst.  I like technology, I use technology, but I am certainly not the guy to ask when it comes to the next big thing.  With that being said, Equinix (EQIX) taught me a very good lesson today.  Aside from being a financial firm, Hedge Fund LIVE (www.hedgefundlive.com) is a website; and websites need to host traffic.  As my next-seat-neighbor Saad would tell you, in order to host traffic you need servers.  Way back when we started our website we bought a server.  It wasn’t big, but it served its purpose at the time.  As time progressed and our site built a consistent user base it was time to explore other options.  About 6 months ago, our venerable COO, Marc (may the) Schwartz (be with you) set out on a multi-day journey to visit “CoLo” facilities in the New York area.  Upon Marc’s return he made an auspicious announcement: “we’re going with the CLOUD” (the Amazon cloud to be exact). 

This got me to thinking – this guy just went on a 3-day hunt for CoLo facilities and came back with a cloud.  It was like going to the store for milk and coming back with potato chips – why the sudden change of heart?  So I put together a little comp sheet (found here) of both colocation and cloud hosting companies.  The first 4 names on the sheet were Equinix, Terremark (TMRK), Rackspace (RAX), and Savvis (SVVS), down 33%, 4%, 11%, and 10% respectively today.  EQIX and TMRK seemed to be heavily dependent on colocation services, while RAX and SVVS split their efforts between CoLo and cloud hosting.  We probably shorted a little bit of each company back then, but have since covered those positions and therefore did not profit from today’s movement in these stocks.  I don’t feel too badly since, for the most part, each of those names other than EQIX is up since that point in time.  Nonetheless, I can’t help but hear Peter Lynch saying “buy [or short] what you know”.