Hi Again.
Our portfolio did very well during April 2019. Our overall gain rose from 44% to 54.5% (or 7%) in 30 30 days and during the same period our Ford holding rose from a loss of 15.9 to a gain of 15.47%, Apple rose from 105% to a 127% gain, Twitter increased its gain from 30.7% to 59.4% and Bank of America rose from 108% to 130%. Over the past 3 months, our overall portfolio increased 41% In value, while the market (Dow Jones) went up only 6% during the same period. According to “Marketwatch” only 5% of money managers beat market indexes. In order to have a general idea of what to expect from the stock market (or stocks or any market for that matter) we have to take a look at technical analysis which has nothing to do with fundamentals such as revenue, profits etc. Mostly it is chart analysis. Right now the market is closing in on its previous highs so there is a high probability of seeing a correction soon. That is not a bad thing. If we do not get a correction and if the market continue to rise, then the market will get overbought and lead to a dangerous correction.
The CNBC technician Carter who made this statement (I have heard other technicians say the same) on 4/29/19 also stated that Ford chart just moved from a bear market to a bull market. I think I am going to pat myself on the back for asking you all to start nibbling at Ford on my last newsletter. It is was just during the last newsletter I asked all of you to start ‘nibbling’ at Ford but I warned you that Ford could go down for a year or more prior to rising. With a 7% dividend yield that would have given you a wonderful opportunity to accumulate Ford at a very low average cost. As long asFord does not cut the dividend, with each decline of the stock, the dividend yield will continue to rise making it more attractive to investors. A 50% decline in the stock price would raise the dividend yield to 14% while the 10 year treasury is at about 3%. Guess what happened on 4/26/, Ford announced very strong earnings on 4/26/19 and became the 2nd biggest auto maker Ford overtook Tesla. Furthermore Ford stated that they noticed a turnaround in the Chinese economywhich was music to investors. After I asked you to buy Ford last month, I bought call options onFord (expiry date 1/15/2021). On 4/26/19 evening I ran in to an executive at FedEx and he asked me, Did you hear what happened to Ford today? Ford went up by 10%!”. On 4/26/19, in 6hrs my Ford call option rose by a whopping 49%!! That is the magic of options. There are many, many things you can do with options. It is possible to be conservative with options if you so desire.
Over the past 35 years I have been experimenting with different ways to make money in the market.I have a new idea and I want to share it with you. For many decades investors were willing to pay a high premium to get in to pre-IPO stocks assuming that they could make a big amount of money when the IPO went public. We have all heard of how pre-IPO company employees made millions when the IPO went public. Over the last 10+ years or so mutual funds have got in to pre IPO stocks spending billions of dollars. However lately people who bought pre-ipo stocks or bought on the IPO day lost money. This has been going on for some time but now the situation is getting worse. Recently I heard an analyst say that people who bought Lyft and people who are waiting to buy Uber are not professional investors but people who use Lyft and Uber. Those people do not know if the stock is overvalued or not. When Facebook first came as an IPO this same thing happened. I waited till the stock dropped to $18 and I got in. Then when it was around $22, most analysts were saying that it would take a long time for FB to monetize and it also could go down like “My Space”.
At $22 I sold my shares at a profit but FB shocked the world by quickly monetizing and within a few months the stock rose over $100. Recently the long awaited Lyft IPO came in to the market. As soon as that wasdone 20% of the stock was shorted! On 3/26/19, Lyft IPO came out at $87 and ever since it has been going down and on 4/26/19, Lyft closed at $57. If you shorted Lyft at $87 on 3/26, in 31 days you would have had a profit of 53%. Let me explain how that happens, initially you sell at $87 and then you buy at $57 ($30/$57=53%). For years the talk was Uber IPO will come to the market cap well over $100 Billion but after they saw the Lyft disaster, they are now talking about $90B. My idea is to short sell Uber when the IPO gets to the market with put options. After the Lyft disaster you might think that Uber buyers will act prudently but I disagree. Consumers all over the world who use Uber knows nothing about market mechanics and it is very likely that they will drive Uber IPO to ridiculous levels like Facebook. My only concern is that it might take some time to see put options on the open market; and if that happens, you can short sell but I do not recommend that as it could turn in to a bottomless pit.
Ford shares closed up sharply higher Friday, after the carmarker posted stronger-than-expected first quarter earnings thanks to a surge in U.S. demand for its iconic pick-up trucks that offset weakening international demand. Shares ended up nearly 11% to $10.41, after Ford said earnings for the three months ending in March rose nearly 52% from the same period last year to a forecast- beating 44 cents a share. Ranger as it came to market, and Transit America's best selling van," CFO Bob Shanks told investors on a conference call late Thursday.(M Baccardax, TheStreet,
4/26/19) Ford Motor Co. on Friday regained its status as the No. 2 U.S. car maker in market value, leaving Tesla Inc. behind after a massive earnings beat that stoked a rally for Ford stock.
Ford F, +10.74% shares were at their best since July and amassed the largest one-day gain in a a decade, bringing the company’s market valuation to around $40.7 billion late Friday. Ford Motor Co. shares soared Friday toward the biggest one-day gain in a decade after the car maker’s “massive” first-quarter earnings beat appeared to dispel worries about the company’s ongoing restructuring effort. The company pinned the beat on “strong” results in its North American and credit businesses. Analysts also zeroed in on healthier numbers from Ford’s international businesses. Ford stock gained more than 10% in morning trade, on pace for their largest one-day percentage increase since April 24, 2009. The stock was headed for the highest close since July 25, 2018. “What a relief!,” analysts at RBC Capital, led by Joseph Spak, said in a note Friday. “Ford reported strong results that showed evidence that (Chief Executive Jim) Hackett’s fitness redesign is taking hold.(Claudia Assis, Market Watch,4/26/19)
Remember a couple of years ago when all of Wall Street lost confidence in Disney due to “chord cutting” and huge losses at ESPN? For most Wall Street pundits, the best days of Disney were behind us. The Disney chart made a classic double top leading to a bottom in 2015-2016 period. I told you that I have confidence in Iger as the CEO of Disney and to bet The farm on Iger. Now Wall Street loves Disney with nothing bad to say about Iger and his Team. Welcome to investing on Wall Street! Since that bottom in 20016, to a top at $140, it rose 58%!
A few days ago, just before Apple was expected to make its earnings call, analysts were saying that the bearish sentiment on Apple was at its highest in many years. On 4/30/19, Apple surprised Wall Street on top (revenue) and bottom (earnings) figures and in after hour trading Apple rose 10%!! What is Warren Buffet’s famous saying? Buy when everyone is fearful and sell when everyone is greedy! Last month (3/31/19) our Apple holding showed a gain of 105% and on 4/30/19, it has risen to 127%!
Have a great month!
Fernando