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Agenda

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Agenda

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  1. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION DISCUSSED DURING HAWKTRADE MEETINGS.  Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost. Investing in any financial instruments does not guarantee that an investor will make money, avoid losing capital, or indicate that the investment is risk-free. There are no absolute guarantees in investing. HAWKTRADE and its members do not bear any responsibility for losses or gains made by members trading on their personal accounts based on analysis from HAWKTRADE meetings.

  2. Agenda • Announcements • Investment competition update • Government Shutdown? • BBRY • Volume and Volatility • JC Penny • Bonds

  3. Newcomer’s Information • We meet every Sunday at 7:15PM – 8:15PM at W151 in PBB • Membership Dues: $20/semester • Food/Drinks every meeting • Investment information and education • Great trading tips and strategies • Investment Competition: $15/semester • Best way to gain experience and learn • Past prizes include iPads, Apple TVs, gift cards • Fun Discussion atmosphere, member involvement

  4. Investment competition • $15 to enter competition • All money goes to prizes so more people = better prizes • Must attend 50% of meetings in order to be eligible for prizes • Top 8 get prizes (tentatively) • Won’t allow high frequency trading or anything that is unrealistic

  5. -1.06%

  6. Peter Schiff on the Fed Taper • https://www.youtube.com/watch?v=Tak9ODlBJgM

  7. Government shutdown?

  8. Why is it happening? • Fiscal year for the government ends Monday • Republicans want to delay Affordable Care Act (Obamacare) a year and that is in the spending bill they passed • Democrats want Obamacare and won’t take any negotiation to the spending bill • If no spending deal is passed, government shutdown will occur at 12:01 A.M. Tuesday

  9. What happens • Mail still comes; airports still function; checks still go out (Medicare, food stamps); prisons stay open • National Parks shut down;no new clinical research patients taken in; IRS stops audits; FDA stops safety inspections; loans for houses would stop being issued; military paychecks delayed

  10. So does it matter? • 17 government shutdowns since 1976 • Historically, down 2.5% in 10 days • 1.4% if 5 days or fewer

  11. Blackberry • Earnings Report • Q2 loss: $0.47/share • Estimated growth rate of -81.5% for Q3 • Write-off of $934 million for unsold phones • Announced layoffs of 4000 employees • Approximately 40% of its workforce • T-Mobile Pulled Blackberry from shelves • Going Private • To be bought out by largest shareholder, Fairfax Financial after 16 years of being public

  12. Blackberry • Fairfax Financial • Called the Berkshire Hathaway of Canada • Largest shareholder (10%) • Six week shop period • Can solicit, receive, and enter into negotiations for other offers • General consensus – going private would be beneficial

  13. Blackberry

  14. Blackberry • Is the failure of “alternative” providers inevitable? • Nokia • Recently purchased by Microsoft, uses Windows OS • Lumina has arguably best camera on the market • HTC • Once a legitimate competitor for second place, has fallen behind in marketshare • Motorola • Introduced Moto X to directly challenge Galaxy S4 • Bought by Google

  15. U.S. Cellphone Marketshare Source: Nielsen

  16. Volume and Volatility • Volume • Measure of number of shares or contracts changing hands over a given period of time • Infers interest or changing expectations in the underlying security

  17. Volume and Volatility • Volume • A spike in volume can validate or nullify trends: • If a stock traded upwards after an earnings report, but with low volume, this suggests the trend is weak because expectations are not significantly changing

  18. Volume and Volatility • Volume • Conversely, a spike in volume after an earnings announcement while trending downward signals a strong bearish trend • Retail investors often follow market movers in separate order flows, perpetuating the trend

  19. Volume and Volatility ~28 million shares

  20. Volume and Volatility • Volatility • Measure in variation of price of a financial instrument over time • Measure of risk, can show consensus of opinion • In short; certainty vs. uncertainty

  21. Volume and Volatility • Volatility • Does not measure the direction of price changes, merely their dispersion • Presents opportunity to buy assets cheaply and sell when overpriced

  22. Volume and Volatility • Volatility • ^VIX • Ticker symbol for the Chicago Board Options Exchange Market Volatility Index • Popular measure of the implied volatility of S&P 500 index options • Measures the market’s expectation of stock market volatility over the next 30-day period

  23. Volume and Volatility • Volatility • ^VIX • Also known as the fear index • Uses a series of options to measure volatility on the S&P 500

  24. Volume and Volatility

  25. Volume and Volatility • Volatility • ^VIX The VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the next 30-day period, which is then annualized. For example, if the VIX is 15, this represents an expected annualized change of 15% over the next 30 days; thus one can infer that the index option markets expect the S&P 500 to move up or down 15%/√12 = 4.33% over the next 30-day period. Source: Wikipedia

  26. Volume and Volatility • Other volatility indexes: 10-year treasury

  27. Fri 27 Sep 13 | 12:15 PM ET If I had a chance I’d short JC Penny:Pro Stop at 2:20

  28. JC Penny (JCP) • CEO Mike Ullman had meeting Wednesday and people reported he said they would not have a stock offering • Announced Thursday an 84 million share offering • Says it’s just to give a vote of confidence to vendors

  29. -54.08% YTD

  30. Why has JCP gone down so much? • 2nd Quarter results • Net sales of $2.66 billion, compared to $3.02 billion last year • Comparable store sales declined 11.9% • Net loss of $586 million, or $2.66 per share • Gross margin was 29.6% of sales, compared to 33.2% last year

  31. Fri 27 Sep 13 | 2:15 PM ET Activist helping or hurting JCP?

  32. What is an activist investor? • Buys a large percentage of a company • With large holding they influence board and other members to make changes • How they choose companies: • Mismanaged • Excessive costs • Could be run more profitably as a private company • Other problems

  33. Bill Ackman • In Fall 2011, bought 14,259,888 shares or 13.85% of Canadian Pacific Railway (CP) worth $1.4 billion • Believed he could streamline production and enhance profitiblity • Shares of CP tripled as Bill Ackman changed the board of directors and put in handpicked CEO

  34. Canadian Pacific Railway 3rd Quarter 2011 (initial purchase) First quarter 2013 (Began selling) Revenue $1.495 billion Net income $217 million Operating margin 24.21% Operating ratio 75.8% Share price $125.96 • Revenue $1.3 billion • Net income $168.8 million • Operating margin 24.19% • Operating ratio 75.8% • Share price $60.62

  35. Bill Ackman with JC Penny • Bought 39,100,000 shares or 18% of company at $25/share over 3 years ago • Was on Board of Directors and picked Rob Johnson as CEO • Brought back former CEO Mike Ullman • Got in argument with other board members and left board • Sold shares all his shares between $12.50-$12.90 • Loss of approximately $490 million

  36. Activist investor “Dream Team” • · Larry Robbinswith 20,060,830 shares, representing 9.1% • George Soroswith 19,986,361 shares, representing 9.09% • Richard Perrywith 19,000,000 shares, representing 8.65% • Kyle Basswith 11,428,450 shares, representing 5.2%  • Total = 32.04% of company

  37. Discussion

  38. Bonds • Debt security with a face value • Has a maturity date • Has a coupon rate • Fixed intervals of payments • Have credit qualities • Negotiable market prices

  39. Different types of bonds • Government, Municipal, Corporate • Fixed rate • Floating rate • Zero-coupon • High-Yield • Convertible • Asset-backed securities • CMOs, MBS’s • Bearer bond

  40. Pricing • Texbook: $1,000 • Real world: $100 • A price of $76.56 corresponds to a price of $765.60 • Spread: the difference of the buy price to sell price • Changing rates • Interest rate rises, bond values decrease • Intersetraes fall, bond values increase

  41. Bond Screener

  42. Verizon Bond Offering • Verizon issued $49 billion dollars worth of bonds • Biggest since Apple’s bond offering of $17 billion • Received over $90 billion in orders for the debt • Using capital to buy out their side of their Vodafone joint venture

  43. Verizon Bond Offering Government yield Verizon yield 3 year: 2.5% 5 year: 3.65% 7 year: 4.5% 10 year: 5.192% 30 year: 6.559% • 3 year: 0.64% • 5 year: 1.40% • 7 year: 2.02% • 10 year: 2.64% • 30 year: 3.68%

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