Have a question in mind that you think is so dumb you’re embarrassed to ask it? That’s what we’re here for today!
This bonus post was inspired by a reader who wanted to know “where to ask a dumb question” here on Stock Gumshoe… and while his question was not actually stupid, and I’m happy to see questions pop up in our comment threads anywhere on the site, I thought it would be a great idea to open the floor and be more welcoming for the shy, the embarrassed, or, yes, even the uninformed.
So this is a no-judgement zone… smart people do things we’d call “dumb” all the time: Warren Buffett didn’t invest in Google in 2004, Albert Einstein married his cousin, and I just had to go back and double check that I didn’t call him Alfred Einstein (which I’ve done before, in print). So if you have that question that you can’t ask your stockbroker or your brother-in-law or Twitter without feeling like a dummy, let ‘er rip by submitting it below. I’ll be nice… and we might all learn something.
And yes, the SEC is always watching, so I must remind you that I can’t give personal investment advice… but I’ll try to share whatever opinion or answers I can provide to any investment-related question you’ve got, though if we end up with a lot of them it might take me a little while to answer thoughtfully.
So please, let your questions fly using the friendly little comment box below… and thanks for being the best readers in cyberspace!
(I will moderate the discussion just to make sure we don’t get too much profanity or offensive stuff, or personal attacks, but I’ll use a light hand — you can be mean to me if you like, just don’t be mean to any other participants.)
Do you like SWN or RRC better? Do you think gas companies will finally rebound in summer of 2018?
Can’t say that I like either one particularly, I haven’t looked at them other than to quickly look them up when you asked.
Given that RRC looks like it has a return on invested capital that’s dramatically more levered to gas prices than SWN, I guess my knee-jerk reaction would be to choose RRC if I were sure gas prices would rise. Though if you go back more than five years, it looks like SWN was more levered to gas prices — I don’t know the company history of either, but there were probably other reasons (discoveries, etc.). Over the past ten years, of course, they’ve been terrible — the Henry Hub gas price is down 75%, RRC is down 78% and SWN is down 90% — more worrisome, over the past two years they’ve failed to stabilize despite (relatively) stable gas prices. That’s not a great sign, but, again, I don’t know the details of why. Here’s that two-year chart:
Will gas prices rise? In the short term, that probably depends more than anything else on what summer temperatures are like — if we get big national heat waves this summer that drive up electricity consumption, gas prices will probably rise in the US… but LNG shipping is still too small to have much impact on pricing, so it’s all about US demand in the short term, and supply will likely jump substantially as more oil drilling takes place at higher oil prices (most wells produce both oil and gas, and in areas with good infrastructure, like Texas, the gas can go to market as well as the oil — though a lot gets flared off in areas without gas pipelines). I’m not an expert on the energy markets, that’s just my common-sense interpretation (and being common, of course, it could easily be wrong).
How do you feel about using automatic stop loss-sell triggers on your stocks and if you use them, what logic to do you apply to setting a price/percent?
I use stop loss triggers to trigger decisionmaking and re-analysis, not to automatically sell a stock. I particularly like the TradeStops volatility quotient stop loss triggers, which is what I track for my portfolio — those essentially set a stop loss based on the trailing volatility for the stock, so if it’s a stock that goes up and down pretty wildly in the course of “normal” trading the stop loss percentage will be much higher at 40% or more, if it’s a low-volatility stock the stop loss might be much lower, down at 10-15%.
Either way, the stop loss is a signal that something has changed in the sentiment — if it’s a momentum stock, I’ll be more inclined to follow that signal and sell, since sentiment is the primary driver and there often isn’t a natural “floor” for the stock if the market starts to believe that the story is “broken.” But if it’s a stock where I’m confident in the fundamentals and think it’s well-valued, and the market is likely to be just temporarily overreacting, I might even buy after it approaches or passes the stop loss trigger.
Travis – would you consider opening up a section where we can post recommendations of things that we subscribe to – , so that everyone can see/use/eliminate the curiosity. For example – a few months ago I foolishly got into the year subscription for the Night Trader that has was soooooo heavily promoted, so if you have a section similar to where we can post our reviews, anybody could post whatever reco’s to whichever author they are subscribe to, and anyone can go and look them up !! So, I could post all the Night Trader reco’s and anyone could go see what they were every day. It saves them from getting suckered into it And for example , sometimes I am curious to see what Fitzerald of Profit Windfalls reco’s are. If someone who subscribed to that would post them, I’d be able to look it up.! So , everyone has all this for free. Although I would accept voluntary donations from those who avoided the dangling carrot and saved their money in order to recover my loss for the Night Trader sub.!!
Fred
Hi, we do try to host reviews and discussions of each newsletter — though some haven’t been entered into our system, I don’t think I’ve added The Night Trader yet, but will do so now.
The intent is to share experiences and opinions, not necessarily to “give away” whatever picks the newsletter makes, but I hope those pages are useful for folks who are wondering about particular newsletters. You can see the list under “Newsletters > Rankings” in the top menu bar or at https://www.stockgumshoe.com/newsletter-rankings/
What are your thoughts on stops? I got stopped out of two stocks, VEEV and MU, and now watching them soar higher. I thought I gave plenty of room for dips, 8-10%, but seemed like these turned around right after they hit my stop. In fact I think VEEV only went two cents under my 10% stop point. Geez!
I think 10% is too tight a stop unless you’re sitting on huge gains and are just itching to sell… I like the TradeStops model, which basically uses the volatility to set a stop loss — essentially, if the stock falls out of the expected trading range it has held over the past year (or whatever), that’s the indication that it’s no longer trending up and might need to be sold. Those are both pretty volatile stocks, so it would be hard to find any several-month period when there wasn’t a chance of them dipping by 10% or more. The volatility quotient stop loss would have been about 25% for VEEV, 38% for MU… sometimes, with volatile growth stocks, you have to be willing to give them a bit more room — even as you acknowledge that they’re so volatile that you might lose money even with a stop loss.
I like to use stop losses as alerts for my long-term higher-conviction holdings — that’s a sign that it’s “not working” anymore and I should find out why, and think about whether my analysis needs to change, or I need to buy more, or need to sell. For momentum stocks, or “story” stocks that I might speculate on, I am more likely to use stop losses to make a quick “sell” decision — that’s mostly stocks where I can’t ID a fundamental backstop for the shares if the story or sentiment has shifted.
An example? Ligand Pharmaceuticals (LGND) has been in my portfolio for a long time. I bought it because I liked the model and they were just about to be solidly profitable and were likely to grow those earnings, with solid optionality from their many clinical programs in development (none of which required them to invest money). Great story, stock was a little bit expensive but it was worth it. Now, it has tripled and the fundamentals are strong… but they have yet to really diversify their revenue streams (they have added more optionality, but it hasn’t borne any fruit yet), but that core business that was strong when I bought is still strong and growing. So as long as that fundamental core of the business (their royalties on Kyprolis and Promacta) is growing, I keep holding, and I watch the stop loss price because the stock trades at 40X next year’s earnings estimates… and if sentiment shifts, or they have trouble with either Promacta or Kyprolis for any reason, the stock could easily fall by 50% or more.
Why don’t I just sell the stock, now that it has gotten awfully expensive? Because I would have said the same thing about Ligand shares several times over the past few years… it was expensive at $80, it was expensive at $100, it was expensive at $130, and now it’s expensive at $190. If the market wants to keep getting more optimistic about the stock, which is still fairly small, I’ll keep allowing it to ride up… and if the story or sentiment shifts dramatically, which would result in the stock falling below a reasonable stop loss level, chances are pretty good that I’ll sell (I never sell automatically, I always have to re-examine the stock first). Right now, that stop loss level per TradeStops would be around $140, roughly a 27% drop, so if it falls to that soon I’ll have missed the opportunity to sell at $190, but also will have protected a large profit and allowed it some room if it wishes to just bounce up and down by 15-20% as it has several times in recent years, but eventually move higher. It’s all a balancing game, but with the general trend being “stocks go up over time” I think it’s important to give them enough room to move a little on the way up.
You sure do make a lot of sense. I should have took my stop off MU after that analyst came out saying it was going to drop into the 30’s. This was not too long after another analyst said it was going to 100. I should have rode that out and probably even bought more. Oh well, another lesson learned. Actually, I wonder if I do learn from all these lessons I experience.
I paid $75 for my Apple shares. Now it’s @$186. What’s a reasonable stop loss level? $135?
The current volatility quotient stop loss from TradeStops would be just under $155, about an 18% stop loss. Makes as much sense as anything else, I suppose, though I do think AAPL shares are higher risk than the market is currently thinking. It would take some pretty bad news about the next iPhone to drive Apple to that level at this point, I would guess, given the strong buying pressure from folks following Berkshire Hathaway and from Apple doing its own massive buybacks.
It is a pretty powerful cash machine at this point, since they can borrow so cheaply (long term debt is up to about $100 billion now, from zero five years ago, most of which went to buybacks without really touching the cash balance), and still do have such a big cash pile — they’ve paid out more than $100 billion over the past two years in dividends and buybacks (about $80 billion in buybacks alone), and that is really shrinking the equity even with $10 billion in stock-based compensation over the past couple years (that’s why the share price has gone up 200% in five years, while the market cap has only risen 120%, shares outstanding has decline by almost 25%). I expect Warren Buffett loves the cash flow behind the story, and also the powerful consumer brand and stickiness of the consumer, and it’s hard to blame him… but if the next iPhone sales cycle fails to generate growth, it’s certainly quite possible that we’ll hit that $155ish stop loss trigger. I’ll think it over again if we get there.
I join recently and love it! It’s amazing how much time you put to give wealth of information free of charge.
Do you give option picks and/or stock picks for your paid members?
How much is the subscription!
Thanks!
Thanks Rasi. I don’t tell you what to do with your money, but I do tell you what I’m doing with mine, including mostly stock picks but also a few funds and some option and warrant speculations along the way.
Travis – I sent you a lengthy note and I saw it on thee site earlier but when I went on just now to see if you responded I can’t find it. Am I going blind (I checked and re-checked both pages of comments and answers) or was it deleted?)
We don’t have it, sorry — must have been a hiccup somewhere, as it’s not in our moderation queue or spam filter either. Last comment I see from your email address was back in October. Please try again, if you’ve got the patience. 🙂
Do you invest in Bitcoins?
I have speculated on bitcoin in the past, though I sold the vast majority of my cryptocurrencies last Fall when I realized I was unable to make any rational assessment of the price. I do still have a trivial amount in a couple wallets (bitcoin and ethereum), but I find the blockchain stories and the long-term potential disruption of some businesses more interesting than the prices of any particular “token” — mostly because I cling to notions of ownership and cash flow and most of the tokens don’t really convey ownership of the business or the technology. I am a bit of a luddite on this and have a hard time with the “they’ll be hugely valuable someday” belief system that’s not based on anything real that I can understand, but I hope to keep learning and perhaps I’ll change my mind again someday.
Why do I keep thinking investors in the Uranium One company should receive compensation for the theft of our investment?
Read on………..
First Indictment Related to Uranium One Deal Players Unsealed
The Justice Department (DOJ) announced the first unsealed indictment related to a massive bribery and corruption racket surrounding players in Uranium One.
Mark Lambert, 54, of Mount Airy, Maryland, was charged in an 11-count indictment, including one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and to commit wire fraud. Seven counts are for violating the FCPA, two counts are of wire fraud and one count is for international money laundering.
“The charges stem from an alleged scheme to bribe Vadim Mikerin, a Russian official at JSC Techsnabexport (TENEX), a subsidiary of Russia’s State Atomic Energy Corporation and the sole supplier and exporter of Russian Federation uranium and uranium enrichment services to nuclear power companies worldwide, in order to secure contracts with TENEX,” Justice said in the announcement.
A recent bombshell report revealed the Federal Bureau of Investigation (FBI) uncovered the scheme before the Obama Administration approved the controversial nuclear deal that put 20% of U.S. uranium resources under the control of Moscow. The Committee on Foreign Investment in the United States (CFIUS), which approved the deal, was led by Hillary Clinton during her tenure as secretary of state.
The FBI documents show Mr. Mikerin, then-director of Rosatom’s Tenex in Moscow, was engaged in illegal activity as early as the fall of 2009. However, for reasons still unknown, the Obama Administration allowed him to enter the country with a L1 temporary work visa in December 2011.
Mueller Probed Witnesses About Podesta Group Lobbying for Russian Interests at Clinton State Department
“As part of the scheme, Mikerin, with the consent of higher level officials at TENEX and Rosatom (both Russian state-owned entities) would offer no-bid contracts to U.S. businesses in exchange for kickbacks in the form of money payments made to some offshore banks accounts,” Agent David Gadren testified. “Mikerin apparently then shared the proceeds with other co-conspirators associated with TENEX in Russia and elsewhere.”
Mr. Mikerin pleaded guilty to conspiracy to commit money laundering and is currently serving a sentence of 48 months in prison. The indictment includes allegations against Mr. Lambert based on his role in effectuating the criminal scheme with his former co-president, Daren Condrey, Mr. Mikerin and others.
Mr. Condrey pleaded guilty to conspiracy to violate the FCPA and commit wire fraud.
Before the Uranium One deal was approved, the FBI had already gathered substantial evidence against Mr. Mikerin and uncovered the Russian plot to corner the global uranium market. Worth noting, the Uranium One deal did not permit the exporting of the material out of the U.S., but unknown quantities have been exported to unknown nations and parties.
According to the indictment, beginning at least as early as 2009 and continuing until October 2014, Lambert conspired with others at ‘Transportation Corporation A’ to make corrupt and fraudulent bribery and kickback payments to offshore bank accounts associated with shell companies, at the direction of, and for the benefit of, a Russian official, Vadim Mikerin, in order to secure improper business advantages and obtain and retain business with TENEX.
The Justice Department unsealed the indictment only weeks after confirmed receiving multiple referrals for criminal investigations over the past year related to Uranium One and the Clinton Foundation. The U.S. Attorney’s office and the FBI in Little Rock, Arkansas, have recently launched a new investigation into “pay to play” allegations at the Clinton Foundation.
Multiple sources told People’s Pundit Daily (PPD) the probe is building upon the progress and evidence of previous investigations.
Federal agents from Little Rock, where the Clinton Foundation was started, have interviewed at least one witness in the last month, though they are expecting to ramp up activities in the coming weeks. In addition to looking into pay-for-play allegations, the probe is examining potential tax law violations.
The Trump DOJ also cleared a confidential informant — who allegedly made tapes of players speaking about offering bribes to the Clinton Foundation — to testify before Congress on Uranium One. The decision lifted an unprecedented non-disclosure agreement put in place by the Obama Justice Department, allowing him to testify about what he witnessed undercover.
It could also prove damning to Special Counsel Robert Mueller III, who ran the FBI during what numerous experts say appears to be a scheme to coverup potential crimes resulting from the deal
Because you’re living in the past. And it was an acquisition, not a theft — maybe the price was unfair, I don’t know, but given that I can’t come up with a single uranium company that’s trading at anywhere near its low price in 2010, let alone near the late 2010 peak, you probably didn’t miss much as an investor.
This is what the chart looks like for UEC, Cameco and Denison mines, the uranium miners that were also around back in 2010 that I can think of… unless folks sold at the 2011 peak, it hasn’t been a fun eight years in the nuclear industry.
Energy better spent looking for the next idea, I would imagine, rather than fuming over a past opportunity lost.
faroton,
this unprecedented activity is unraveling.
Thanks for posting.
More is coming, much, much more.
Stay tuned
I have a question. I got this email from Agora Financial with a video to watch about making money with their “Alpha Contracts”. They talk about making money without buying stock, or selling options. They talk about locking in a “check” with no risks. I think this is too good to be true. Of course they don’t tell you what the “Alpha Contract” is. They “show” a blurry list with the money they made very easy to see. Travis have you or anyone else heard about this? The service costs $1,995 for a year and is only good until today. They are offering free laptops to the 1000 people that sign up. There are no refunds. I’m not signing up but was just wondering if this service actually helps people. I have signed up with expensive newsletters etc. before and did not make money. Thank you for any answers.
Sounds like it’s a bond-buying advisory — those folks have a terrible time convincing subscribes to sign up and buy corporate bonds, so they often resort to pretty sneaky ads that don’t mention the word “bond.” Haven’t looked at the details yet, though.
Hello Travis,
Whats your opinion on EQXGF?
I took a tax loss on Equinox shares late last year, and bought them back a bit later, but have generally been too optimistic on this one in recent years.
I still think it’s a very compelling story, but admit that it is not all that cheap, partly because dealmaking with much earlier-stage juniors to create Equinox over the past couple years has diluted the near-term impact of gold production from Aurizona.
Positives are the near-term cash flow from Aurizona, which should pour its first gold late this year, and the squishier “story” that this is Ross Beaty’s last hurrah and he will be doing the buying and dealmaking he’s known for as he builds another mid-size gold producer over the next few years.
Still highly risky, mostly because it’s no longer (thanks to dilution) super-discounted based on the expected performance of the Aurizona mine, but for me it’s worth holding because Aurizona seems very de-risked and has a lot of potential for expansion, and because Beaty has bet so big on the company as his next big project. Wouldn’t bet a lot on it, but I’m happy to bet a little.
Wow Bubble Chaser, that’s the exact question I was about to ask.
Wow, Bubble Chaser, that’s the same question I was about to ask: What’s zack scheidt’s marijuana beer stock?
Hi Dean, covered that one here: https://www.stockgumshoe.com/2018/05/friday-file-anheuser-busch-has-their-sights-on-one-specific-microcap-marijuana-company/
50K to invest in pot stocks. What would your portfolio look like for best 12 month returns. Go
These stocks are in my Pot Account $CVSI $APHQE, $APRI, $BPMX, $CANN, $FFRMF, $KSHB $MJNA, $PHOT, $USMJ, $XXII, $ACBFF, $GWPH
I have found this site helpful in helping me make decisions on pot stocks. (https://greenmarketreport.com) The Green Market Report Index is a list of 30 stocks that have been selected based on market capitalization and revenue production, plus high standards of company operation. These companies must be predominantly focused on the cannabis industry and the list is reviewed on a quarterly basis.
I am not recommending any of these stocks just showing what I hold
Hi Rob T, please see my Reply to Martin’s post of May 19, 2018 10:17 am
Hi steveflick, I could not see your reply on my post ?
Hi Martin, after posting, it was “in moderation” = I believe in que for Travis to review/approve. I received an email 12:07 pm today from Stock Gumshoe that the Reply/Post was Approved, so I presume you can now see it.
Gosh, Travis must be working 7 days a week!
I’m really skeptical about the bulk marijuana/growing business being able to justify the market caps of most of the companies. I’d think about putting a little bit in IIPR (talking my book, since I own it), perhaps some small speculations on companies that appear to have strong and growing brands and good marketing or customer loyalty, or provide unique services that marijuana retailers require, and a lot of cash to wait for some clarity on wholesale pricing to emerge.
Over the past year I have bought a number of MJ stocks. I’m way down on some of them. Can you give me a short answer about the following? ACCBF-down 47%; APRI-down 87%; EMMBE-43%; LHSIF-61%; NWURF-75%; and TWMJF- ??
Thanks for your help.
I don’t like the wholesale marijuana business or the growers very much, I expect that will be commoditized and that pricing will be weaker than the producers are hoping because of all the capital rushing into the growing business. I’d look for retail brands that are able to attract a loyal following without heavy marketing, and I’d be patient about letting them emerge before investing — I haven’t looked at all of those stocks individually, but that’s the main issue I’d think about: How can they differentiate in a market that will be saturated at some point?
Unfortunately, the financials for pretty much all of the pot stocks I’ve looked at are completely absurd based on the current business — so you have to do a lot of imagining about what the future might look like and how that company will have a competitive edge… and, in fact, whether they can survive the massive increase in production and get through to some future rational business. It’s probably going to be a rocky few years, I’d look for real brand power, follow those companies as they develop their brands, and then sit back and wait for the financials to look rational — I expect all of these companies will be raising money and spending money hand over fist over the next few years, so their prices will probably not go straight up even if all the regulatory pieces fall perfectly into place.
What will rising interest rates do to the real estate market.? I am lo0king to buy a second home. Should I wait to invest?
Homes are great places to live and spend time, but usually not the best investment. Buying rental property can certainly work if you’re in the right area and have the time to put into management, but I tend to think that buying a second home is an indulgence, not an investment.
Doesn’t mean it’s bad, we bought a little condo near the beach a few years back and it has been a life-changing delight… and maybe it will be worth more than we paid in 20 years, or maybe it won’t, but as far as cash flow goes it’s a substantial drag, and we’re not going to sell it so it doesn’t matter much what the price does in the next few years. Worth it as a place that we like to spend time, but not an “investment.”
I don’t think we’ll see a national real estate crash in the near term, but that’s just a guess. I do think that we’re likely to see housing prices rise over the next year or two as rising rates spur borrowers to rush to buy, but it’s certainly possible that if rates keep rising that will slow down the market. Depends a lot on where you’re thinking of buying, I imagine, and what the migration and household formation trends are like in that particular area.
What is the tech that is being pushed as one that Warren Buffet and other Billionaires are supposedly putting billions into?
Not sure what this refers to, sorry — lots of ads try to imply that Buffett is buying something, often with a very spurious connection to reality.
Is there a philanthropic “think tank” anywhere who’d examine an opportunity to create “perpetual” funding by providing continual donor payback, and having substantial commercial revenue opportunities as well, per the None Left Behind overview at https://goo.gl/BKgBXY?
I don’t know, but one result of the massive explosion in income inequality over the past couple decades has been a tremendous rise in philanthropy — so lots of great projects are being funded, though I expect the “donor payback” ones and the similar “social investment” cooperatives are likely to remain small-time. You can’t scale community involvement, for most small donors that has to be local and meaningful.
This is a very stupid question: what broker do you use to invest in the African market (JSE)?
By the way, thanks a lot for your newsletters!
I don’t invest directly on the JSE. Interactive Brokers is the broker I most often use to buy direct on overseas exchanges, but they don’t have equity access to South Africa (they do offer contracts for difference in SA).
The only South African companies I’ve ever owned were Sasol and Naspers, the latter of which I still own, and I bought both OTC in the US (or through actual US listings, which they both used to have and Sasol still does), my other investments in Africa have been indirect, through companies listed in Toronto, NY or London.
Why but Napsers when Ten Cent is about the same price?
The price per share being close for the ADRs is just a coincidence. Buy Tencent if you just want clear and unfiltered exposure to Tencent, buy Naspers if you want a little extra on the side and a discount on Tencent, with the additional risk of it being an indirect holding that puts a second management team (and country) into play.
Hi Travis – tell us some of your history – personal and professional? I often wonder what sort of person you are given your insightful analysis and sketchy references to family, interests and financial connections.
I have a BA in government from Cornell, and a Masters in Information Science from the University of Maryland. I have been, among other professions, a world champion ice cream scooper, a fundraising copywriter, and a tenure-track academic, and gave it all up to write about money and solve puzzles. I’ve been married to a wonderful woman for 2o years (in July), and we have three kids and three dogs, and live in the bucolic Pioneer Valley in Western Massachusetts.
I’ve never managed money for anyone else, and started learning about investing 25 years ago thanks to a small family gift that got me to thinking and reading (and making dumb mistakes). As I learned more, I started writing and blogging about my investment ideas and the good and bad choices I had made, and then about 12 years ago I started to get very curious about those marketing pitches — which used the same selling techniques I had learned as a fundraising copywriter — and wanted to take them apart and see what was inside. I started doing that for other people, and it hit a nerve, and the ads kept coming, and before you know it a decade has passed and thousands of teasers have been laid bare.
As an investor, I have read widely and attended a lot of investment conferences to keep learning, and I’m delighted to wake up every day and think about a new way to understand businesses and investing. And, of course, I still love solving teaser puzzles and writing about them for you — that is the purest type of research, I think, if you can wade through the promise of extraordinary returns and still thing rationally about that little nugget of truth you found hiding inside the hype, well, then you’re on your way to thinking dispassionately about anything… and that’s one of the real keys to investing success.