Thursday, 22 July 2010


$WDC results were worse than "expected". One would imagine that the market's expectations were lower than the consensus analyst expectations (given the pounding its taken this quarter), he's picked up a little stock given the beating it took today and after hours once reported.

Just to highlight some of the widely quoted stats that the Raven looks at before running his own prop models;
5y sales growth; ~20%
5y EPS; ~17%
Forward p/e 5.1
Trailing p/e 5.3
p/sales ~0.8
EV/ebitda ~ 2.56
Short ratio 2.2
% of float short 5.8%
52w change -(0.2)%
52w residual -(19.2)%
current ratio>1
mkt cap $6.92bn
from market watch;
8 buys, 3 overweights, 6 holds, 1 underweight, 0 sell

or with a touch more brevity;
growth CHECK
balance sheet health CHECK
valuation CHECK
beaten up CHECK
reason for being cheap ?? The Raven would guess that the sector has always traded at a lower multiple, but that there is softer demand and some reports of much lower pricing in June.
The Raven doesn't like the insider selling over the last year.

There also isn't a catalyst, and in this sort of environment its not a smart idea to have "value" trades on, or trades that are based on the market coming to its senses and deciding to reprice an asset upwards in your favour. Especially when the chart looks so ugly.

HOWEVER, the Raven does think it is a touch oversold technically and just can't resist a tiny punt that it recovers some of the ground its lost. This is not a position that he's going to add to if it goes against him as his stop is going to be pretty far away.

Bernanke was a big yawn today.

More interesting to the Raven's eye was the $EURUSD continuing to move lower, that really is a bullish sign for Bunds. He heard a great comment today, "if Greek banks pass the stress test, then the test has failed" or something to that effect. Not a bad line.

$AMR (3.4)%, $NFLX (0.6)%, $WDC (5.2)% (and off another 3.5% in AH trading), $WFC +0.6% yesterdays view of the results would have produced about +1.5% delta neutral at the close.

tomorrow we should see $AXP, $CAT and $SNDK that the Raven cares about. The Raven is short some $AXP, but thats more of a hedge for some of his longs.

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