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***Official*** 2012 Stock Market Thread

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chusteczka said:
OCZ is dropping and seems like it could very well reach $2. I will wait for it to level out. We seem to be kicking off a bearish summer.
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I don't like OCZ at all and have no position, however how do you guys come up with $2 from a stock that trades $4.51?

Do we just throw darts now days?
 
The-Noid said:
I don't like OCZ at all and have no position, however how do you guys come up with $2 from a stock that trades $4.51?

Do we just throw darts now days?
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Honestly, from a consumer and technical point of view - I don't know how OCZ could possibly sustain itself at this rate. Here's my reasons (again, purely from a consumer standpoint):

  1. They are selling at deep discounts compared to other manu's
  2. They are aggressively pushing LARGE rebate incentives
  3. Their product quality has always been suspect - but over the last year has gotten abysmal
  4. They are shipping defective parts left and right (see #3)
  5. (From #4) Are suffering from huge amounts of returns and RMA replacements

Their current product lines are plagued with high failure rates (especially in the lucrative SSD market), and they really just don't seem to care.

I'm not saying they're a $2 stock, but unless something severely changes at the company I don't see them getting any better any time soon either.
 
The-Noid said:
I don't like OCZ at all and have no position, however how do you guys come up with $2 from a stock that trades $4.51?

Do we just throw darts now days?
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I have no idea, other than its price graph has a steep negative slope that shows no sign of leveling to zero or even positive.

Hugo talks like he knows something. Possibly something that is obvious in the annual report.

EDIT:
I have had an OCZ Sata III SSD running in my computer for nearly a year with zero problems. It works perfectly and I am happy with it. I plan to purchase another soon.
 
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chusteczka said:
OCZ is dropping and seems like it could very well reach $2. I will wait for it to level out. We seem to be kicking off a bearish summer.
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Hitting $2 would mean that it'd be trading below tangible book value. The last time OCZ saw these levels, the folks who bought doubled their money. And OCZ is a MUCH better company with much stronger prospects today than they had when they traded at $10.94.
 
chusteczka said:
I have no idea, other than its price graph has a steep negative slope that shows no sign of leveling to zero or even positive.

Hugo talks like he knows something. Possibly something that is obvious in the annual report.
Click to expand...

Here's what you need to know about OCZ. I might sound like a "pumper", but I didn't make my investment and I don't have my conviction without some serious research. If you believe the company is worth selling, then do so. But don't do it because of the panic and mindgames the hedge funds like to play.

1. Gross margin expansion. The company is not yet profitable, but it's a growth stock, so we need to examine future profitability. Gross margins (that is, how much $ they make on the stuff they sell before operating expenses such as R&D and marketing are paid) are improving significantly. In Q4 of last fiscal year, their GMs were 16.6%. In fiscal Q4 2012 (most recent quarter), these margins has expanded to 25%. A lot of the avenues from margin expansion -- moving towards their own controllers (or heck, even moving to the Marvell hardware + Indilinx firmware) across the rest of their lineup will allow them to improve margins going forward. They expect to exit FY2013 (current year) with GM's in the 30%+ range. I don't see why they won't be able to do that.

2. The next part of the equation, and it goes hand in hand with the GM expansion, is that their revenues are growing INCREDIBLY. In FY2011, they took in about $190M in revs, FY2102 we saw $365M, and the LOW END of the guidance for FY2013 is $630M [OCZ has exceeded the high end of their guidance each year they've been public]. With operating expenses staying more or less flat from here (they've already hired the R&D teams as well as the marketing staff), I expect that higher gross margins + significantly higher revenues will lead to extremely solid profitability over the next few years. At the most recent conference call, the CEO said that they expect profitability in FQ2 of this year. FQ1 just ended today, so hopefully the last unprofitable quarter is behind us.

So, some math. Suppose that OCZ is treated not as a high, hyper growth company such as FIO, but as a mature company. That means a Price to Earnings ratio of 10 is reasonable, right? And now consider the 67.3M oustanding shares. So suppose for FY2014, the company hits the low end of FY2013's revenue target of $630M. Further suppose they hit the low end of their operating margin target of 18%. This gives us ~$1.68/share in earnings. Priced at a conservative multiple of 10X, you get a $17/share stock, more or less in line with Piper Jaffrey's price target.

However, let's play a little more optimistically. If $630-700M is the revenue range for FY2013, let's assume growth to $800M for FY2014 and again assume the low end of the operating margin target. That gives us ~$2.13/share earnings for FY2014 (calendar 2013), which, again, with our conservative multiple of 10X, gives us a $21 stock .

Granted, there are caveats here. Additional share dilution could be a problem. The company could miss its revenue and/or gross/operating margin targets. But I believe I've shown here that there's a significant buying opportunity here for those with the nerve to stick out this terrible macro + high short interest. As always, there's risk, but I think the risk/reward ratio looks good here.

I end this post with the following quote by Peter Lynch:

"Often, there is no correlation between the success of a company's operations and the success of its stock over a few months or even a few years. In the long term, there is a 100 percent correlation between the success of the company and the success of its stock. This disparity is the key to making money; it pays to be patient, and to own successful companies."
 
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Nice post Intel17. :thumbsup:

RCPratt, OCZ is a tech stock and this is a tech forum.
I was of the opinion RIMM was beaten to death a long time ago but conversation continues.


EDIT:
I am holding OCZ but will wait for it to drop further before purchasing more.
And if more people take this position, when OCZ starts to go up again, it will do so quickly.
 
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Thanks, chusteczka. We'll talk more about OCZ after some material news comes up regarding the company.

In the mean time, anybody have any thoughts on Applied Materials? I think the demand for semiconductor manufacturing equipment will only increase, especially with the capex increases from the big boys like Samsung, TSMC, and Intel. Even UMC is looking to expand capacity and develop more advanced process nodes.

The dividend is also pretty nice. I'm just wondering why the stock is so beaten up -- is their exposure to solar really all that awful?
 
Explain hedging bets to me in the stock market. Why is it better than just not buying as much into your position to start with?
 
"Why is it better than just not buying as much into your position to start with?"
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Talking from the point of view of mutual funds vs. individual stocks, some is psychological and some is trying to increase the likelihood of reducing your average cost basis vs. lump sum investing.

If you had a large lump sum (e. g. inheritance) to invest for retirement say 50 years into the future, the saying goes the best time to invest is now (all one lump sum), because over very extended periods of time (obviously you still have to choose a smart long-term investment (e. g. VTSMX in a taxable account), not just time it right), the stock market as a whole should go up in value and it is more important to be in the market than trying to time a significant pull back as entry point, which theoretically could never come.

Psychologically, that is very hard to do for most people (e. g. if anyone put whole lump sum into market on one a particular day, always seems like market crashes the day after, and the day after other day you thought about lump sum investing but didn't, market soars), so it is usually recommended to dollar cost average (http://www.investopedia.com/terms/d/dollarcostaveraging.asp) that lump sum over time so hopefully the average cost basis is lower than if you got unlucky and bought at a temporary high in the market.

If you are really talking about hedging individual stock positions with options or stuff like that, someone else will have to chime in on that topic.
 
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JTsyo said:
Explain hedging bets to me in the stock market. Why is it better than just not buying as much into your position to start with?
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You want to hedge against some specific risk that you don't want exposure to. For example as a US investor you are interested in a company that trades in EUROs. You love the company but do not want exposure to currency fluctuations. You would buy shares of the company and short the EURO. You have now hedged against the currency, but remain exposed to the performance of the company.
 
Kntx said:
You want to hedge against some specific risk that you don't want exposure to. For example as a US investor you are interested in a company that trades in EUROs. You love the company but do not want exposure to currency fluctuations. You would buy shares of the company and short the EURO. You have now hedged against the currency, but remain exposed to the performance of the company.
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That's a good example, but what I think he's curious about is holding shares of a certain stock and then buying puts or calls of the same stock.
 
Kntx said:
You want to hedge against some specific risk that you don't want exposure to. For example as a US investor you are interested in a company that trades in EUROs. You love the company but do not want exposure to currency fluctuations. You would buy shares of the company and short the EURO. You have now hedged against the currency, but remain exposed to the performance of the company.
Click to expand...

ahh didn't realize it was used to separate risk like that. Thanks.
 
Looking at it and given what the market is doing, I'm thinking cumulatively OCZ will bottom out around $3.50-$3.80/share sooner rather than later.

In other tech news, LOGI is hovering just around $10 right now. :hmm:
 
So I know this might be living pretty dangerously, but what are people's thoughts on Bank of America (BAC). I've been tracking it for a while, saw it ramp to $10, and now it's sitting at $7.

The balance sheet is improving (well, as far as we can tell 😛), and they'll be in a position to reinstate a dividend at some point. Think this could be a solid long term buy and hold?
 
SunnyD said:
Looking at it and given what the market is doing, I'm thinking cumulatively OCZ will bottom out around $3.50-$3.80/share sooner rather than later.
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Don't be so sure. I'd expect $7+ long before the mid $3's. Although, I suppose it depends on how SSDs/storage sector goes.

Right now, OCZ's market cap is less than STEC's. To put it bluntly, STEC is dying. Revenues shrinking, profitability went out the window last quarter, margins shrinking, and just not doing well. And yet it's valued at $320M but OCZ, a company that's in hyper growth mode, is now worth $290M?

Please. I'd be surprised if OCZ hit $4. And even if it does, I don't really care. When it's sitting at $10-15/share, it won't matter that I didn't get the absolute bottom 🙂
 
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Intel17 said:
So I know this might be living pretty dangerously, but what are people's thoughts on Bank of America (BAC). I've been tracking it for a while, saw it ramp to $10, and now it's sitting at $7.

The balance sheet is improving (well, as far as we can tell 😛), and they'll be in a position to reinstate a dividend at some point. Think this could be a solid long term buy and hold?
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Regarding BAC - They were a ridiculously solid buy when they were hovering in the $5's not too long ago. They're divesting unprofitable chunks left and right, and have settled just about all of their outstanding issues from the crisis at this point.

$7 is cheap, $8 is cheap. If it goes under $7, especially if you're looking at a long term stock, it's a no brainer for once the market stabilizes.
 
SunnyD said:
Regarding BAC - They were a ridiculously solid buy when they were hovering in the $5's not too long ago. They're divesting unprofitable chunks left and right, and have settled just about all of their outstanding issues from the crisis at this point.

$7 is cheap, $8 is cheap. If it goes under $7, especially if you're looking at a long term stock, it's a no brainer for once the market stabilizes.
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Yeah, that's what I'm thinking. My horizon is several years for BAC if I were to invest.
 
Intel17 said:
Yeah, that's what I'm thinking. My horizon is several years for BAC if I were to invest.
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If you're looking 2+ years out, then yeah - odds are you'll at least double your money.

Not that it matters, but iirc Buffet has a large stake in BAC, and in fact picked up a good chunk more back when it was trading under $5. He mentioned it being severely undervalued at the time.
 
SunnyD said:
If you're looking 2+ years out, then yeah - odds are you'll at least double your money.

Not that it matters, but iirc Buffet has a large stake in BAC, and in fact picked up a good chunk more back when it was trading under $5. He mentioned it being severely undervalued at the time.
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He owns preferred shares, no? Don't they pay a ridiculously huge dividend?

Added to JNJ position. Love adding to my safer, higher yielding positions on days like this.
 
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