I wrote a week ago about how I made 57% on my money overnight when Amazon stock crashed. It's time to add a footnote.
My strategy of buying put options (ahead of the earnings announcement) was to protect my actual shares; and it worked. But what about the shares themselves? They went down in value by around 10% on October 24. Most (amateur) investors, after seeing their shares go down 10% overnight, will panic-sell and "take their lumps." That's seldom a good strategy, however. If you liked something at $314, why would it not be even more attractive at $285?
The morning of the Amazon stock crash, I bought more shares immediately.
In the intervening time, Amazon has gone from $285 (just a week ago!) to $302 this morning. Buying more shares turned out to be exactly the right thing to do.
The moral is: If you believe in a stock, buy more of it when the price goes down. Don't panic-sell at a loss.
Will Amazon keep going up from here? No one can know that, of course. But I think six months from now, Amazon will not be under $300, any more than AAPL will be under $100.
Why buy AMZN at all if the company shows no profit? Because free cash flow is still growing. The only thing that could take Amazon seriously lower ($50 a share, say) would be a major health event that causes Mr. Bezos to leave the company unexpectedly. If Bezos ever leaves, I expect there will be a very short-lived dip in the stock price. You should buy that dip. Any subsequent management team will be perceived (rightly or wrongly) as "more responsible" and more likely to force profits to the bottom line than Mr Bezos. And that will take the share price sky-high.
Bear in mind, Bezos could make Amazon profitable overnight, any time he chooses, just by "turning a few knobs." But doing so will interrupt the company's growth. Right now, he chooses growth.
That's worked very, very well so far.
Friday, October 31, 2014
Tuesday, October 28, 2014
Making Money from Twitter
A few days ago, I blogged about how I made money from the recent sharp drop in Amazon's stock price. Well, I repeated the trick (to the tune of a 62% overnight net gain) with Twitter. Except this time, it wasn't a hedge but an all-out bare-naked bearish bet. I sold what few Twitter shares I owned a few hours prior to the earnings announcement, then doubled up on December $50-strike put options. The options were up very sharply today, of course. (Twitter stock went down 11% overnight.)
Things always look clear in retrospect. But I must say, in retrospect, it was, in fact, a pretty safe bet (going into last night's announcement) that Twitter stock would go down. The only question was by how much.
I had studied the previous quarter's results. What I learned is that Twitter is pretty far from turning a profit. Had Twitter announced a $400M quarterly top line, last night, with expenses held to the same as last quarter's expenses, the company would have broken even. I think we all knew they were not going to turn in a $400M top-line number. The critical question would turn out to be: How are enrollment numbers looking? Is the user base growing? And: With advertising starting to appear in timelines, are people still as engaged as ever?
On the latter question, the answer seems to be no. Monthly timeline views (on a per-user basis) are actually down 7%.
Twitter has a big problem, which is that its user numbers are inflated and most users are not active. Twitter claims to have something like 284 million monthly active users, but a recent report by an independent analyst firm (Twopcharts) shows that only 126 million Twitter users have tweeted in the last 30 days.
Twitter's CEO was on CNBC last night trying to defend the large number of "non-logged-in" users on Twitter (lurkers who come just to view World Series news or whatever). He actually maintained that such users are valuable to advertisers. Which is kind of like saying people who dig old magazines out of barber-shop trash bins are valuable to advertisers. It was hilarious.
I don't want to rehash Twitter's numbers endlessly. For the best article on the recent earnings report, I recommend this top-notch Forbes piece by Chuck Jones.
Bottom line, what prompted me to buy puts ahead of yesterday's earnings announcement were these factors:
1. Twitter user numbers are inflated.
2. Twitter is very far from break-even on its financials.
3. The potential for an upside surprise in the earnings report had to be considered extremely small.
4. The $50 early-October valuation for the stock was/is based on hype, not solid financials.
The fourth factor finally convinced me to get rid of all Twitter shares and buy naked puts. That decision turned out to be correct.
Things always look clear in retrospect. But I must say, in retrospect, it was, in fact, a pretty safe bet (going into last night's announcement) that Twitter stock would go down. The only question was by how much.
I had studied the previous quarter's results. What I learned is that Twitter is pretty far from turning a profit. Had Twitter announced a $400M quarterly top line, last night, with expenses held to the same as last quarter's expenses, the company would have broken even. I think we all knew they were not going to turn in a $400M top-line number. The critical question would turn out to be: How are enrollment numbers looking? Is the user base growing? And: With advertising starting to appear in timelines, are people still as engaged as ever?
On the latter question, the answer seems to be no. Monthly timeline views (on a per-user basis) are actually down 7%.
Twitter has a big problem, which is that its user numbers are inflated and most users are not active. Twitter claims to have something like 284 million monthly active users, but a recent report by an independent analyst firm (Twopcharts) shows that only 126 million Twitter users have tweeted in the last 30 days.
Twitter's CEO was on CNBC last night trying to defend the large number of "non-logged-in" users on Twitter (lurkers who come just to view World Series news or whatever). He actually maintained that such users are valuable to advertisers. Which is kind of like saying people who dig old magazines out of barber-shop trash bins are valuable to advertisers. It was hilarious.
I don't want to rehash Twitter's numbers endlessly. For the best article on the recent earnings report, I recommend this top-notch Forbes piece by Chuck Jones.
Bottom line, what prompted me to buy puts ahead of yesterday's earnings announcement were these factors:
1. Twitter user numbers are inflated.
2. Twitter is very far from break-even on its financials.
3. The potential for an upside surprise in the earnings report had to be considered extremely small.
4. The $50 early-October valuation for the stock was/is based on hype, not solid financials.
The fourth factor finally convinced me to get rid of all Twitter shares and buy naked puts. That decision turned out to be correct.
Friday, October 24, 2014
How I Made 57% Overnight When Amazon Stock Got Crushed
DISCLAIMER: I am not an investment advisor. Before entering into any trading strategy based on anything presented here, consult a qualified professional (or better yet, half a dozen of them). This post is meant to be educational, not advisory.
With that out of the way, let me explain an investment tactic I have sometimes used with great results. None of this will be news to an experienced investor. It will be news to some.
Going into last night's Amazon earnings report, I was holding some shares of Amazon (accumulated during the big market down-move of earlier this month). Naturally, I wanted to protect those shares against a sudden price drop like the one that happened after the previoous earnings report, 90 days ago.
I bought put options (a bearish bet) late in the day yesterday, fearing that a bad report from Amazon would move the stock lower. Just to review: A put is a contract that gives you the right to sell a particular stock at a predetermined price (the so-called strike price) during a particular time frame. I bought the December AMZN put, strike price $295, yesterday afternoon when the stock was trading around $314. The $295 strike means the put was $19 "out of the money." Because it was so far out of the money, the put was relatively inexpensive, at $8.99 (times 100 shares: $899, plus commission, per contract).
Last night, after Amazon announced its $437 million loss (95 cents a share; much more than the 74 cent loss the Street was expecting), the stock price fell sharply. It opened this morning down $30, at $284. (It rebounded to $290 within a few minutes.)
My put contract went from being $19 out-of-the-money to $5 in-the-money. Its price rose from $8.99 to $14.28, a 57% overnight gain.
Taking a naked short position is risky, but in reality I was using the put to protect shares of the actual stock. (It was a hedge, in other words.)
This same hedigng tactic paid off handsomely for me three months ago, at the last Amazon earnings call, which also moved the stock down about $30 a share.
Will it happen again? No one knows. But we do know that earnings announcements often cause sudden dramatic moves in stock prices, particularly with tech stocks.
Options are not for every investor. They decay in price (quite rapidly) over time, they're subject to huge price moves, and if you're not careful you can lose part or all of your money. If you decide to look into options, educate yourself thoroughly on the risks. The risks can be substantial. But so can the rewards.
With that out of the way, let me explain an investment tactic I have sometimes used with great results. None of this will be news to an experienced investor. It will be news to some.
Going into last night's Amazon earnings report, I was holding some shares of Amazon (accumulated during the big market down-move of earlier this month). Naturally, I wanted to protect those shares against a sudden price drop like the one that happened after the previoous earnings report, 90 days ago.
I bought put options (a bearish bet) late in the day yesterday, fearing that a bad report from Amazon would move the stock lower. Just to review: A put is a contract that gives you the right to sell a particular stock at a predetermined price (the so-called strike price) during a particular time frame. I bought the December AMZN put, strike price $295, yesterday afternoon when the stock was trading around $314. The $295 strike means the put was $19 "out of the money." Because it was so far out of the money, the put was relatively inexpensive, at $8.99 (times 100 shares: $899, plus commission, per contract).
Last night, after Amazon announced its $437 million loss (95 cents a share; much more than the 74 cent loss the Street was expecting), the stock price fell sharply. It opened this morning down $30, at $284. (It rebounded to $290 within a few minutes.)
My put contract went from being $19 out-of-the-money to $5 in-the-money. Its price rose from $8.99 to $14.28, a 57% overnight gain.
Taking a naked short position is risky, but in reality I was using the put to protect shares of the actual stock. (It was a hedge, in other words.)
This same hedigng tactic paid off handsomely for me three months ago, at the last Amazon earnings call, which also moved the stock down about $30 a share.
Will it happen again? No one knows. But we do know that earnings announcements often cause sudden dramatic moves in stock prices, particularly with tech stocks.
Options are not for every investor. They decay in price (quite rapidly) over time, they're subject to huge price moves, and if you're not careful you can lose part or all of your money. If you decide to look into options, educate yourself thoroughly on the risks. The risks can be substantial. But so can the rewards.
Monday, October 20, 2014
Grab Twitter Names from a Web Page
I've been remiss in not posting more often here. Been carried away curating news for my Twitter account. But speaking of which: I want to share a hack with you (please stay with me here even if you're not a coder) for getting a list of Twitter names from a web page. This is a really quick and dirty hack, but also relatively easy. I encourage you, even if you are not a coder, to try this simple experiment. Ready?
First, go to a Twitter window or tab, preferably the one at https://twitter.com/i/notifications.
In Chrome, type Command-Shift-J. (Firefox: Shift-F4.) That will make a console window appear.
Now Copy and Paste the code shown below into the console window.
Now you can cut and paste those names as desired, to do with as you please.
Note: The code indiscriminately grabs all Twitter names on the page. It doesn't attempt to do anything special like just grab names of people who Retweeted you. (Left as an exercise for the reader.)
I often use this trick to harvest names of people to gang-thank in a Tweet. (On Fridays, I tend to thank a lot of people for using the #FF hashtag on me.)
Try it.
Code explanation: The first line uses a regular expression to match names of the form @letters_or_numbers. The second line creates a lookup table (with the clever name lut). The third line stuffs names into the table. Doing this, in this particular fashion, has the side effect of unduplicating the names.
The fourth line creates an array and stuffs the names into it.
The fifth and final line sorts the array and prints it to the console, one name to a line.
Ain't pretty. Kinda fugly. But it works, right?
First, go to a Twitter window or tab, preferably the one at https://twitter.com/i/notifications.
In Chrome, type Command-Shift-J. (Firefox: Shift-F4.) That will make a console window appear.
Now Copy and Paste the code shown below into the console window.
m = document.body.textContent.match( /@[_a-zA-Z0-9]+/g);
lut={};
for (i=0;i<m.length;i++) lut[ m[i] ]=1; // undupe
r=[]; for (k in lut) r.push(k);
r.sort().join('\n');
Okay. In Chrome, you execute the code by hitting Enter. In Firefox's Scratchpad you'll need to do Control-L. In either case, executing the code should cause Twitter names (like @kasthomas) to appear in an alphabetized list, inside the console.
Now you can cut and paste those names as desired, to do with as you please.
Note: The code indiscriminately grabs all Twitter names on the page. It doesn't attempt to do anything special like just grab names of people who Retweeted you. (Left as an exercise for the reader.)
I often use this trick to harvest names of people to gang-thank in a Tweet. (On Fridays, I tend to thank a lot of people for using the #FF hashtag on me.)
Try it.
Code explanation: The first line uses a regular expression to match names of the form @letters_or_numbers. The second line creates a lookup table (with the clever name lut). The third line stuffs names into the table. Doing this, in this particular fashion, has the side effect of unduplicating the names.
The fourth line creates an array and stuffs the names into it.
The fifth and final line sorts the array and prints it to the console, one name to a line.
Ain't pretty. Kinda fugly. But it works, right?
Thursday, October 16, 2014
Can Apple Win Back Market Share from Android?
Android has roughly 70% market share in most countries. Apple hovers around 30%. What's the outlook for Apple? Can it hope to make a dent in Android's overdog status? Can it hope to reverse a longstanding trend toward Android dominance?
I think it can, and will, starting early in 2015.
Apple has announced its newest smartphones will ship in 36 more countries by the end of October, and the company is on track to be in 115 countries by the end of the year.
New markets (and rollout dates) for iOS include:
Given the size of the Chinese and Indian markets, and considering the ultra-strong demand for iPhone 6 in China (now said to exceed 20 million pre-orders, according to a report on China's Tencent), it appears Apple could in fact be setting the stage for a major market-share upset over Android.
BCN, a Japanese company that tracks consumer goods, found that 22 of the 25 top selling smartphones for the week of September 22 to 28 were iPhones. So even in Japan (where Apple has seen a drop in market share), it appears Android faces tough competition, with Apple likely gaining back some of the market share it lost in the past year.
Let us also not forget that the race isn't just about market penetration numbers. It's also about profitability. Apple has a lonstanding tradition of kicking the market's ass in profitability. Four years ago, Apple had 7% of the computer market but 35% of the industry's profits. Something like this will happen in smartphones as well. Apple could well end up with 30% of the market but 50% of the profits. That will matter hugely to company performance and investor happiness.
As I write this (10:45 Eastern US, 16 Oct 2014), AAPL stock is $96.02. This is a bargain price, IMHO. I would be a strong buyer at this level.
I think it can, and will, starting early in 2015.
Apple has announced its newest smartphones will ship in 36 more countries by the end of October, and the company is on track to be in 115 countries by the end of the year.
New markets (and rollout dates) for iOS include:
- October 17: China, India and Monaco
- October 23: Israel
- October 24: Czech Republic, French West Indies, Greenland, Malta, Poland, Reunion Island and South Africa
- October 30: Bahrain and Kuwait
- October 31: Albania, Bosnia, Croatia, Estonia, Greece, Guam, Hungary, Iceland, Kosovo, Latvia, Lithuania, Macau, Macedonia, Mexico, Moldova, Montenegro, Serbia, South Korea, Romania, Slovakia, Slovenia, Ukraine, and Thailand
Given the size of the Chinese and Indian markets, and considering the ultra-strong demand for iPhone 6 in China (now said to exceed 20 million pre-orders, according to a report on China's Tencent), it appears Apple could in fact be setting the stage for a major market-share upset over Android.
BCN, a Japanese company that tracks consumer goods, found that 22 of the 25 top selling smartphones for the week of September 22 to 28 were iPhones. So even in Japan (where Apple has seen a drop in market share), it appears Android faces tough competition, with Apple likely gaining back some of the market share it lost in the past year.
Let us also not forget that the race isn't just about market penetration numbers. It's also about profitability. Apple has a lonstanding tradition of kicking the market's ass in profitability. Four years ago, Apple had 7% of the computer market but 35% of the industry's profits. Something like this will happen in smartphones as well. Apple could well end up with 30% of the market but 50% of the profits. That will matter hugely to company performance and investor happiness.
As I write this (10:45 Eastern US, 16 Oct 2014), AAPL stock is $96.02. This is a bargain price, IMHO. I would be a strong buyer at this level.
Tuesday, October 07, 2014
Adobe, Amazon, and the Great "Spying" Scandal
Alarmist stories at Gigaom, Arstechnica, and elsewhere have recently villainized Adobe Systems for collecting e-book analytics (in unencrypted form) from readers, surreptitiously. "Adobe is Spying on Users, Collecting Data on Their eBook Libraries," a headline from http://the-digital-reader.com blares. Arstechnica is shocked, shocked that people's reading habits are being monitored. And the data's being sent over the wire unencrypted! OH MY GOD!
Give me a freakin' break.
Let's get something straight. Amazon "steals" your reading stats every time you read an e-book. So does Apple. (See the WSJ story "Your Ebook Is Reading You.") Oh, and by the way, who do you think owns Goodreads (which knows a lot about your reading habits)? Amazon, that's who.
Google processes your Gmail to uncover keywords that help it put customized Amazon ads in your face every day. Somehow that's not news, but the fact that Adobe slurps e-book analytics from users of Adobe Digital Editions is treated as if it's the scandal of the century.
Analytics is a big (and I mean BIG) part of what Adobe does now. Do you remember when Adobe acquired Omniture in 2009 for $1.8 billion? What do you suppose that was all about?
It was about analytics, that's what.
Some of the largest web properties in the world run on top of Adobe's Experience Management suite. The latter ties world-class content management to world-class analytics solutions.
Read up on Adobe's SiteCatalyst here.
Arstechnica, by the way, is a Conde Nast property, and Conde Nast is a bigtime Adobe customer. So for Arstechnica to run a sensationalistic screed saying Adobe is stealing people's private reading data is a bit silly. Every time you visit Arstechnica's site, every detail of your visit is captured, rest assured.
Folks, everything you do online is captured, measured, stored, analyzed, by someone, somewhere. Sure, Amazon knows how fast a reader you are, what you like to read, what you finish and don't finish reading, etc. Apple knows this stuff too. Adobe too.
That world we used to live in where no one knew this stuff about you? That world before web analytics? The world of paper-and-ink books that could be read in private? That world is pretty much gone with the wind. Unless you do, in fact, still mostly read paper books. (As I do.)
Let's drop the hysterics about Adobe "spying on readers." Everyone with a web connection is being "spied on" (if that's what you want to call it) nonstop, all the time.
If you don't like it, write your Congressperson. Start a petition. Unplug from the Internet.
But don't heap scorn on Adobe. That's just plain immature.
Disclosure: I used to work for Adobe Systems. I do not work for them, in any capacity, today. These are my opinions. They come solely from me. No one handed them to me. Got it?
Give me a freakin' break.
Let's get something straight. Amazon "steals" your reading stats every time you read an e-book. So does Apple. (See the WSJ story "Your Ebook Is Reading You.") Oh, and by the way, who do you think owns Goodreads (which knows a lot about your reading habits)? Amazon, that's who.
Google processes your Gmail to uncover keywords that help it put customized Amazon ads in your face every day. Somehow that's not news, but the fact that Adobe slurps e-book analytics from users of Adobe Digital Editions is treated as if it's the scandal of the century.
Analytics is a big (and I mean BIG) part of what Adobe does now. Do you remember when Adobe acquired Omniture in 2009 for $1.8 billion? What do you suppose that was all about?
It was about analytics, that's what.
Some of the largest web properties in the world run on top of Adobe's Experience Management suite. The latter ties world-class content management to world-class analytics solutions.
Read up on Adobe's SiteCatalyst here.
Arstechnica, by the way, is a Conde Nast property, and Conde Nast is a bigtime Adobe customer. So for Arstechnica to run a sensationalistic screed saying Adobe is stealing people's private reading data is a bit silly. Every time you visit Arstechnica's site, every detail of your visit is captured, rest assured.
Folks, everything you do online is captured, measured, stored, analyzed, by someone, somewhere. Sure, Amazon knows how fast a reader you are, what you like to read, what you finish and don't finish reading, etc. Apple knows this stuff too. Adobe too.
That world we used to live in where no one knew this stuff about you? That world before web analytics? The world of paper-and-ink books that could be read in private? That world is pretty much gone with the wind. Unless you do, in fact, still mostly read paper books. (As I do.)
Let's drop the hysterics about Adobe "spying on readers." Everyone with a web connection is being "spied on" (if that's what you want to call it) nonstop, all the time.
If you don't like it, write your Congressperson. Start a petition. Unplug from the Internet.
But don't heap scorn on Adobe. That's just plain immature.
Disclosure: I used to work for Adobe Systems. I do not work for them, in any capacity, today. These are my opinions. They come solely from me. No one handed them to me. Got it?
Wednesday, October 01, 2014
And Now for a Bit of Perspective
A little perspective can be a good thing, so the next time you feel a need to have your mind blown, just watch this short video and you're sure to come away with a "perspective reset."
Some additional perspective: On a clear night, using only your naked eye, you can see about 5,000 stars, and the furthest of them is around 21,000 light-years away, but most are much closer. The most distant object visible (barely!) with the naked eye is the Andromeda galaxy, 2.5 million light-years distant. Everything else you see at night is "only" a few thousand light-years away.
If you were to travel from the Milky Way to Andromeda, it's possible that most of your trip would occur in total blackness; you would almost certainly traverse areas of space where no stars are visible to the naked eye (because of sheer distance). You'd look out the space ship's window and see nothing at all (unless you used a telescope).
More perspective: If you were to shrink the solar system down to where the earth is a foot away from the sun, the nearest star would be 50 miles away. But if you were to shrink the Milky Way galaxy down to a foot in diameter, the nearest galaxy is only 25 feet away.
I know. Hard to imagine.
Sci-fi authors: Take note!
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