Weekly Update, May 6, 2018

Plans and Clues Blog – a personal investment journal

More General / Macro Oriented Weekly Reads 

  • Company Specific News
    • HASI earnings release and the market’s reaction to the facts were odd imho and the second consecutive quarter where the company delivered pretty much what they said they would and there’s a sell off.  Just baffles me.  Seems like there’s a group of investors who are always thinking that the company will delivery beyond what the company predicts (tells investors), and when the upside surprise if missing, a sell-off.  HASI management team seems to be executing their strategy just as described https://seekingalpha.com/article/4169663-hannon-armstrong-sustainable-infrastructures-hasi-ceo-jeff-eckel-q1-2018-results-earnings
    • AAPL is the case study for cash flow to net earnings ratio over time … i think a great read, not so much for the APPL example, but how we may use this to evaluate other companies, e.g., i might have sold my terrible GE position before my capital gains evaporated to near 0.  http://fundamentalis.com/?p=7760
  • Good Reads in General (Macro Focus)
    • This author gets a bunch of crap from readers (just browse the comments), but i think this is one of the better articles to really get your head around some of the interconnectedness and interdependencies and virtuous cycles that are going to continue to influence our investment success (or failure)  https://seekingalpha.com/article/4170152-flashpoints-risks-word-gandalf
    • Same author with a warning about reading only those articles (data sets) that supports your bias; i try to constantly challenge my bias and deliberately read opposing views (my own choir can be my very worst enemy) https://seekingalpha.com/article/4169674-just-tell-want-hear-ok
    • Labor seems to be one of the key variables behind further rate increases (inflation and investor demand from Asia are others).  Rates of growth on productivity, workforce inclusion / exits, and wage growth, i find much more important than a summary unemployment rate.  It surely seems that the desired growth to support continued rate increases is decelerating  https://seekingalpha.com/article/4168516-viewing-employment-without-rose-colored-glasses
  • Rates: — A panel discussion on rates that was hard for me to find an actionable outcome, but the dialogue was interesting when you focus on the variables they discuss https://seekingalpha.com/article/4170251-bond-yields-headed-major-breakout
  • S&P: — The always insightful market update from Lance Roberts https://seekingalpha.com/article/4170383-market-hangs-onto-support – my perspective is there is tension in the momenteum / direction at a ‘market level’ and this sets up exaggerations of price swings to news or events — opportunities on both sides to play back the regression to mean/norm.
  • Jeff Miller’s WTWA – https://seekingalpha.com/article/4170358-weighing-week-ahead-stocks-stuck-neutral
    • First … look at Jeff’s headline and mashup w/ the above bullet:  “Why are stocks stuck in neutral?”
      • Another S&P roller coaster to nowhere?
    • This is chart i do not remember seeing before, and if it accurately maps smart money sentiment, this follows my perception of news / blogosphere sentiment -> decidedly negative relative to not too long ago
    • Here’s a version of everybody’s favorite employment view, but wait for Jeff’s follow-up bullet (first the chart) 
      • now the bullet (quote): “Unemployment falls to 3.9% but wage growth remains weak (Dean Baker).”
      • Wage growth and productivity are the variables that i am now thinking are most important to infer rate direction acceleration
    • Of the small set of Jeff’s ‘The Bad’ this is the bullet that caught me:
      • “ISM manufacturing and services indexes both missed expectations, although the readings remain high. (Bespoke).”
        • Missing expectations on such a widely followed index is perplexing … what are analysts missing is my question?
    • Weekly Indicators

      • Unchanged 10yr (materially)
      • S&P unchanged
      • Anticipated inflation unchanged
      • Technical health falls
      • … stuck in neutral
      • I agree w/ Jeff’s 2 fear bullets (quote):
        • “Iran. The deadline for US withdrawal from the agreement is nearing. There are still no signs of progress. Estimates suggest that Iran sanctions could move oil prices higher by $10 bbl.
        • Deterioration in the tariff and trade talks. The high-level meetings have produced no progress on an issue of great economic significance. This is the most significant issue for the market, and it remains a rhetorical playground for world leaders.”
  • ESG Investing / Proactive Investing

Specific Actions, Plans, & Analysis

  • T – Still on my ‘should buy more’ list, but could not pull the trigger.  https://seekingalpha.com/article/4168476-t-sky-falling … Somewhere between 31.50-31.75 is sweet spot for position adds at this point
  • PFE – Last week i thought i would increase my position in PFE; then i started poking around.  This article helped me form one view that pushed back my urgency in taking additional positions https://seekingalpha.com/article/4169013-pfizer-buy-dip
    • While the author does a great job of describing the value of PFE core competency of late stage trials and marketing / sales, i find that insufficient capability with a limited moat to bet really big on the company.  This is part due to my superficial understanding of big pharma R&D risks / benefits.
    • I will continue to dig into PFE, but am expanding my search parameters in the healthcare product segment before jumping in more
  • FEYE – been on my watch list for almost 2 years and i have yet to pull trigger in any meaningful way (only swing trades).  This post is more positive than i am but conceede i have not dug to the bottom of the well https://seekingalpha.com/article/4170299-fireeye-turnaround-track i will also not take position with ‘hope’ of buyout / M&A.  (on DCF basis FEYE is ~15% overvalued – so there has to be a big cashflow breakout to support higher values)
  • IOTS – still have my position w/ cost basis of $6.75.  With earnings coming up, i looked very hard to best guess to buy more before / after earnings.  Reading thru as much as could find on company, i have no better view … 5 analysts cover the company and estimates are tightly bound.  Price action Monday and Tuesday will determine my play.  Here is a 5-day chart w/ pivots.  I may take another 25% position or so between 8.30-8.00 if possible – else, will wait for earnings.  I have stop-loss at $8.00 (graph from https://www.barchart.com/)

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