presentation for mta
DESCRIPTION
Boston MTA Presentation on EB Capital Markets, LLCTRANSCRIPT
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
CHANGE is the most useful word in the dictionary for making money in the stock market. By measuring
change across technical, fundamental and seasonal data points, opportunities can be exploited.
THE TREND IS YOUR FRIEND..sometimes, he likes to play hide and seek…
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
Portfolio Manager Points:
•Save time: too many stocks too little time…•Beat peer group•Grow AUM
Investor Points:
•Improve Win/Loss Ratio
•Increase velocity of turns, avoid dead money
•Capture the bulk of a move, early actionable…
“Determine your strike zone and make them pitch to it”, Teddy Ballgame
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
The Technical Components of Change:
Momentum Factor:
CP – P5 = M
Where CP is Current Price, P5 is Price 5 days ago and M is momentum.
This short-term momentum indicator measures Week over Week change, providing a faster moving component to complement our long-term trend factor.
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
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1/7/ 2009 1/17/2009 1/27/2009 2/6/ 2009 2/16/2009 2/26/2009 3/8/ 2009 3/18/2009 3/28/2009 4/7/ 2009 4/17/2009 4/27/2009
AMZN Price
AMZN Score
Universe
AMZN score crosses above large cap average universe score near
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
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7/24/1998 12/6/1999 4/19/2001 9/1/2002 1/14/2004 5/28/2005 10/10/2006 2/22/2008 7/6/2009 11/18/2010
SPX
200 dma
Upper Band
Lower Band
Long Term Trend Factor:
Simple Moving Average analysis using 200 day moving average supplemented with an upper and lower band range.
200dma (1.05) = Upper Band
200dma (0.95) = Lower Band
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
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9/1/2002 1/14/2004 5/28/2005 10/10/2006 2/22/2008 7/6/2009 11/18/2010
IYT Adj Close
200dma
Upper Band
Low er Band
The spread between the lower and upper band is a neutral bias. The use of a banded 200dma helps reduce head fakes and false positives, allowing additional conviction.
Scores are rewarded above the upper band and punished below the lower band. A move from below the lower band or down from above the upper band would add or subtract a specified number of points from the security’s score.
Score + or – Long Term Trend Factor = adjusted score.
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
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9/9/2008 10/29/2008 12/18/2008 2/6/2009 3/28/2009 5/17/2009
NFLX Weekly Score
Universe Avg. Score
NFLX moves to an 80 on 12/11 ($27.89)
NFLX moves to a 90 on 1/3 ($31.94).
NFLX price peaks at $49 April 13th.
NFLX 2008-2009
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9/9/2008 10/29/2008 12/18/2008 2/6/2009 3/28/2009 5/17/2009
Price
200dma
Top Range
Bottom Range
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
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8/6/2007 11/14/2007 2/22/2008 6/1/2008 9/9/2008 12/18/2008 3/28/2009 7/6/2009
PFE Chart
200dma
Upper Band
Low er Band
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
Other Technical inputs considered in our process for commentary:
•50dma crossover above 200dma
•VIX as cross-check at inflection points only
•% of our 1800 stock universe above our upper 200dma band, by market cap, sector or industry.
•% of our 1800 stock universe below our lower 200dma band, by market cap, sector or industry.
•Sector and industry returns for 1-3 month and year-to-date measured by widely traded ETF’s
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
Volume Analysis:
•Dow theory:
• V + P = Bullish
• V + P = Bullish
• V + P = Bearish
• V + P = Bearish
5 d(V)/M(V) and M(V)/YTD(V) = Ratio of Sentiment
Where d = days, V = average daily volume, M= Monthly average daily volume, YTD = year-to-date average daily volume.
Average Daily Volumes
DBB (Base Metals ETF)
March & April YTD % Change
461,000 273,326 68.81%
Feb 28th
$11.64 $13.89 19.33%
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
•Transports action vs. SPX/DJIA action – confirm or deviate.
•Intraday activity
oDown open, intraday low, up close = Bullish
oUp open, intraday low, up close = Bullish
oUp open, intraday high, down close = Bearish
oDown open, intraday high, down close = Bearish.
Informal Action
oWatch 11am action – international close.
oWatch 2pm action – coincident properties to end of day
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
Other:
• Correlation and divergence of various asset classes – re. dollar gold relationship.
oCorporate bond action vs. equity action.
oHigh yield action vs. equity action.
oBond ETF action vs. equity action.
oDollar vs. Commodity action.
o Front Page Factor…are folks too pessimistic? Optimistic?
o MACD at oversold/overbought levels.
• Investor Behavior relative to news flow
oGood news as bad = Bearish
oBad news as good = Bullish
• Look for relative strength divergences with price.
• Fibonacci levels at inflection points.
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
FUNDAMENTAL COMPONENTS OF CHANGE:
Earnings Momentum
FY – CY =
Where FY is future year Street consensus and CY is Current Year
Earning Beats: Absolute Basis
oTrailing 4 Qtrs
oRE-SE=BEAT/MISS
oWhere RE is Reported EPS and SE is Street Estimate
•3&4 beats = bullish
•2 beats = neutral
•0&1 beat = bearish
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
Insider Buying
•At the market insider purchases by key insiders (CEO, SVP, CFO, etc)
•Not compensation related purchases or options exercising.
•Same price investors would pay.
•Reflects true level of optimism in the company future, eliminating the corporate bias/cheerleading permeating analyst days
Note: BBY CEO bought over $40mn of stock in October at $21-23; the stock has traded as high as $40 since.
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
Short Interest
High SI = Bullish
Where SI = short interest days-to-cover short based on average daily volumes and total shares short.
•Consider SI across sectors at inflection points and vs. prior rallies to gauge slope and duration of the move.
•Consider SI by market cap
•Avoid the temptation to be SPX centric on SI
The higher days-to-cover the more likely demand from covering activity will drive price momentum higher given:
•The stock has positive technicals.
•The stock is enjoying EPS growth.
•The stock is beating Street estimates.
•The stock is being undervalued vs. historical levels.
•The stock has positive 3-month seasonal support.
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
PE Range Analysis
CY PE / 5 YR PE Low
FY PE/ 5 YR PE Low
CY PE / 5 YR PE High
FY PE / 5 YR PE High
Where CY is current year and FY is future year.
Relative position of ratio of PE to historical 5 Year PE range indicates current sentiment in relation to prior years sentiment.
•Investors are willing to pay a range for each $ of EPS.
•The range will be wider and higher for early development companies.
•The range may be wider and higher for high growth EPS companies.
•Dislocations of investor sentiment represent a deviation of sentiment from historical PE ranges, providing insight into future upside or downside as investor sentiment normalizes.
•Reflects investor Fear/Greed pendulum.
1. Stocks trading above 5 Year PE ranges represent overly enthusiastic investor sentiment, which will pressure future returns.
2. Stocks trading below % year PE ranges represent overly pessimistic investor sentiment, which will support future returns.
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
Seasonality Factor•Rolling 5-year calendar quarter returns.
•QE AC – QB AC / QB AC
Where QE is quarter end close, AC is adjusted close, QB is prior quarter close
•Rolling 5-year ongoing 3-month returns.
o3ME AC – 3MB AC / 3MB AC
Where 3ME is 3 month close, AC is adjusted close, 3MB is prior 3 month close.
Ex. 7/31/08-4/30/08 divided by 4/30/08
Aggregate seasonality by individual security by:
1. Market Cap
2. Sector
3. Industry
Provides cap/sector and industry over and underweight bias.
Positive absolute returns for each period:
4 and 5 of 5 periods positive = bullish
3 of 5 = neutral
0, 1 and 2 of 5 = bearish
Copyright 2009 E.B. Capital Markets, LLC - All Rights Reserved
Where are We Today? And, Where do We go
Tomorrow?