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Tuesday, March 25, 2008

Why I like Visa

Some quick facts about Visa Inc. (NYSE:V)

-It has the world's largest retail electronic payments network.

-IPO priced @ $44, open at trading for $59. Having sold 406 million shares, its also the largest IPO to date.

-MasterCard Incorporated (NYSE:MA) priced @ $39 in May ‘06, opened at trading for $41 and is now trading at around $216. More than 400% move in less than two years
Now coming on to why I like Visa (I also do like Mastercard):

-Revenue comes from processing fees. Visa estimates about 42% of its transactions is derived from payment for staples such as groceries and utility bills. So even during hard times, the demand for staples will remain and business maybe even better for Visa if its customers use it to tie over short term cash flow problem

-Below are some statistics from Monetary Authority of Singapore on credit cards in Singapore:
-As you can see from above, the number of accounts (main cardholders) and amount of spending (billings) have been increasing at significant pace in the past 19 years. While not all countries are growing at such a rate, the overall business in this industry is still a very good one.

-Credit cards business is very lucrative. I know because I used to be an analyst in this sector. There are several lines of revenue sources and year on year growth is respectable even during times of slowing economy.

On the revenue front, card issuers are constantly thinking of ways to increase card utilization e.g. promotion and tie-ups with retailers, utilities payment etc. across various customer segments, especially targeting the young adults and emerging affluent. In emerging markets like China, I believe card issuance is growing at exponential rate and getting these new customers on board is priority.

On the cost front, card issuers are always thinking of ways to reduce the cost of acquiring new customers or acquiring them via the cheaper channels such as mailers or telemarketing.

Therefore, this business, while competitive, has very healthy profit margins. Excellent business model. If I have the money, this is a good one for long term investment. Meanwhile, I'm waiting for the stock to become optionable...



Mon: Existing Home Sales
Notable earnings: TIF, WAG

Tue: Consumer Confidence
Notable earnings: CMC

Wed:
Durable Orders, New Home Sales
Notable earnings: ORCL, PAYX

Thurs: GDP
Notable earnings: ACN, APOL, GPN, LEN

Fri:
Personal Income, Personal Spending, Core PCE Inflation, Michigan Sentiment
Notable earnings: KBH

Wednesday, March 19, 2008

Markets Await Uncle Ben's Announcement

The markets are getting used to 2%-3% moves each day and you will realise that what used to be wide range in the past is now considered the norm. Just take a look at the recent bars on the major indices. Wow...and as for the news about The Bear Stearns Companies Inc.(Public, NYSE:BSC), I was dumbfounded. I think its a ridiculous buy-out price. I had expected a buy-out announcement on Monday, between $20-$30. I have never imagined it to be on fire sale, at $2!

As I'm writing now, we're waiting for the Fed policy statement in about half an hour's time. Fed funds futures now priced in a 96% probability of a 100 bp cut, with a 75 bp cut fully priced in. The markets have been trending up so far since the gap up this morning on better than expected earnings results from Lehman Brothers (NYSE: LEH) and Goldman Sachs (NYSE: GS). I wonder if it can have another leg up after the announcement as it looks quite extended on an intraday basis. Major indices are up between 2.5%-3% as of now. Can Uncle Ben gives the market what it wants?


Mon: NY Empire State Index, Capacity Utilization, Industrial Production
Notable earnings: BSC

Tue: Building Permits, Housing Starts, PPI, FOMC Policy Statement
Notable earnings: GME, GS, ADBE, LEH

Wed: Visa IPO
Notable earnings: NKE, MS

Thurs:
Phil Fed, Leading Indicators, Options Expiration (Quadruple Witching)
Notable earnings: FDX

Fri:
Good Friday (Markets closed)

Wednesday, March 12, 2008

Intraday Action: BSC and $MNX

Today is a great day for those who traded the double bottom or inverted head and shoulders pattern. The market gapped up, traded in a range, then pulled back, but was unable to close the gap by late morning. This is a strong sign that it can sustain the positive momentum for the day.

Above is a 2 day 5min chart of The Bear Stearns Companies Inc. (Public, NYSE:BSC). Enter on break of neckline. Target move is the height measured from the head to the neckline. You can use the Fibonacci Extension (200%) drawn from the head to the neckline to see the target better. Given the choppy nature of the markets lately, it would be wise to take partial profits at the 61.8% extension and hold the remainder for final target.

This is a 2 day 5 min chart of $MNX, the Mini Nasdaq 100 Index. Same story as BSC, only thing is alot is left on the table as it makes a final surge 15 min before market closes.

$MNX is a good proxy for those who want to day trade options on the market. It has much better bid/ask spreads than the OEX, and on the hand, has a wider daily ATR for intraday movements than the SPY and DIA.

Monday, March 10, 2008

Nasdaq the Weakest of the Trio

Earnings have wind down, with a few more retailers reporting. Last week, we see the Nasdaq break Jan's low and S&P 500 and DOW are both near Jan's low as well. In the above short term chart by stockchart, we see the Nasdaq accelerating its downside relative to the other 2 major averages since mid Feb. Shorting or buying Puts on the Tech is a good idea.

What's to happen next? We won't see any significant market moving data coming out until end of the week. As I said in the earlier post, this market is now very news/event driven. Rumours of Fed cutting its rates earlier, credit or liquidity issues are swinging the market up and down. Adhere to the 3Rs:

Reduce number of open positions
Reduce number of contracts
Reduce time frame to avoid whipsaw


Otherwise, staying in CASH is an option too (excuse the pun)


Mon: Wholesale Inventories
Notable earnings: HOV

Tue: Trade Balance
Notable earnings: DKS

Wed:
Notable earnings: AEO, MW, SIGM, TBSI, VIP, ARO

Thurs:
Retail Sales, Business Inventories

Fri:
CPI, Michigan Sentiment, Fed Chairman Benarnke to speak about home onwernership
Notable earnings: ANN

Wednesday, March 05, 2008

Watchlist For This Week

A little late, but nevermind...we've got alot of market moving data coming out this week. This market is very edgy and reacts violently to any event, good or bad. Basically, it is very news/data driven.

Mon: Construction Spending, ISM Index

Tue: Fed Chairman Benarnke speaks about Mortgage Foreclosure, Dallas Fed President Fisher speaks about inflation & growth, Fed Governor Mishkin speaks about economic outlook
Notable earnings: HLYS, CHS, CLWR

Wed: ADP Employment, Non-Farm Productivity, Factory Orders, ISM Service, Fed's Beige Book
Notable earnings: BIG, BJ, COST, CSIQ, SKS, PETM

Thurs:
Pending Home Sales, NY Fed President Geithner speaks
Notable earnings: JOYG, COO, URBN

Fri: Non-Farm Payroll, Unemployment, Fed Vice Chairman Kohn speaks
Notable earnings: CIEN


Because of the sell off in the last few sessions, there aren't many candidates for PUT options, most are too late for entry now. Wait for retracement to resistance or former support level before considering entry. On the other hand, I've many stocks forming bull flags and a few triangles play. Here's the list:

Potential Bulls: FCX, ILMN, CLF, MICC, CF, CNQ, GES, SGR, HOC, ABX, AGU, GILD, CMP, CEPH, MDR

Potential Bears: VMW, ZMH, MDC, NILE, NIHD

Triangles: DE, PPDI, CVD, IHP, MON

Greetings From U.S.

I'm back to blogging! Took a few days to settle down. Its pretty cold and very dry here and I'm still trying to get use to it. But one thing is for sure: Its feels REALLY good to be able to trade during normal hours, instead of having to follow the market at night. No more falling asleep while trading, lol!