webinar7 - earnings season

8/18/2019 Webinar7 - Earnings Season

1/18

All opinions expressed by the webinar participants are solely their opinions. You should nottreat any opinion expressed on this webinar as a specific inducement to make a particular

investment or follow a particular strategy, but only as an expression of an opinion. You mustmake an independent decision regarding investments or strategies mentioned on this webinar.Before acting on information on this webinar, you should consider whether it is suitable for yourparticular circumstances and strongly consider seeking advice from your own financial orinvestment adviser.


2/18

Earnings Risk/Reward

• Expectations, sentiment, implied earnings move, short interest.

• Price action, technicals

• Valuation, comparative, historical

• Future catalysts - product launch/cycles, corporate action, capital return etc.

• Potential surprises, headwinds, tailwinds (currency, em exposure etc).

• Arriving at a view to buy sell or hold.


3/18


4/18

IBM - Reported Today


5/18

IBM - Reported Today

My take (from 4/12): IBM sets up as a good near term short after a sharp reversal to

the downtrend. Positive fundamental news will likely be met with a grain of salt, another

downgrade to guidance will cause the stock to retrace a portion of the recent rally.

Hedge against 100 shares of IBM ($152.50):

Buy the April22nd 150/140/130 put butterfly for 1.60

• Costs about 1% of the underlying for protection

• Protection below $148.40

• Max protection of $8.40 at $140

Defined risk alternative to owning shares (152.50):

Buy the April22nd 152.5/165 call spread for 3.00

• Breaks even at $155.50 (up $3 vs the $7 implied move)

• Max gain possible at $165 in the stock (up ~10%).

• Max loss of only $3 on a move lower


6/18

IBM - How’d it Play Out?

• Beat by $0.26 at $2.35 per share.

• Revenue beat expectations of $18.28b at $18.7b

• But 16th consecutive quarter of lower revs

• Maintained previously weakened earnings guidance for 2016

• Stock is down after hours

Hedge will work with stock here, saving a few dollars in losses

Defined risk alternative better than share losses

What’s the trade now?


7/18

Goldman Sachs (GS) - Tomorrow Morn

• Implying a one day move of a little less than 3%. The 4 qtr average has been only about1.5%. The ten year average has been about 3%.

• Banks stocks traded very poorly relative to the broad market heading into earnings lastweek, the worst performing sector in the S&P 500. BAC rallied about 2.5% in the dayfollowing its results last week, C closed last Friday unchanged, JPM the first bank to reportclosed up 4%, while WFC closed down 50 bps.

• Sentiment: Wall Street analysts remain fairly mixed on GS, with 16 Buys ratings, 12 Holdsand 1 Sell, with an average 12 month price target of $186, or about 16% higher than currentlevels.

• Price Action / Technicals: The stock is one of the worst performing in the Dow Jones

down 12% on the year, down 27% from its 52 week highs and sadly only up about 14%from its 52 week and 2016 lows made in February, basically in line with the gains of theS&P 500.

• The two year chart looks like a massive head and shoulders top with $170 the necklinethat was huge support until its breakdown in early January. $170 could serve as veryimportant technical resistance in the near term.


8/18

Goldman Sachs (GS) - Tomorrow Morn


9/18

General Motors (GM) - 4/21

• Implying about a 3.75% one day move which is in line with its 4 qtr average and slightlyshy of its long term average of about 4%.

• GM is down 8% ytd, up 16% from its 2016 low made in July, but still down about 16% fromits 52 week highs made last April. On a 5 year basis, the stock is down about 25% from itsall time, post financial crisis IPO highs made in early 2014, and up about 65% from its 2012post IPO lows.

• The most obvious trend from the 2014 highs is a downtrend with a series of lower highsand a series of lower lows.

• Sentiment remains very poor, with 12 Buy ratings, 10 Holds and 1 Sell with an average 12month price target about $36. Short interest is about 3% of the float.


10/18


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13/18


USDJPY 5 year


14/18

• Implied move about 5% in either direction.

• Stock has rallied on avg about 6.5% over the last 4 quarterly reports with the largest move a16% gain after their Q2 results last July.

• Wall Street analysts overwhelmingly positive with 45 Buy ratings, 5 Holds and NO Sells with anavg 12 month price target of $927, or 17.5% higher than current levels. Short interest only 1.2%of the float.

• GOOGL trades nearly 23x expected 2016 adjusted eps $34.50 growing at 17%, but on a GAAPbasis it trades at 28.5x. Sales are expected to grow in 2016 to $72 billion, yoy growth of 19%.

• Capital Return: last year the company hired a new CFO from Morgan Stanley who promptlytapped the debt markets to the tune of $5 billion and started to buy back stock for the first time inthe company's history. GOOGL has $78 billion in cash on their balance sheet, or about 15% oftheir $533 billion market cap. Investors would like to know more about how they plan to deploythis cash for acquisitions or cash return.

Alphabet (GOOGL) - 4/21


15/18


GOOGL is up 1% on the year, up 15% from its 2016 lows made in February and up a whopping 50% from its 52week lows made last April. The stock looks poised to make a run at the prior all time highs that came the dayafter they reported their Q4 results on February 1st.


16/18



17/18

BULL

I’m focused on:

• YouTube traction

• Margins will not be as exciting on higher TAC and capex

• New opportunities

• Management discussion of shareholder friendly agenda

• Bottom line big cap growth with reasonable valuation



18/18

To Tim.

You have been a contrarian of the bears, which by the wayI'm one of. So far you have been right. Where do you see the S&Pgoing in the next couple months, and if you

are forced

to make acall, where do you see S&P at the end of the year (closer to 2000,2300, or other)? - Jorge

I believe this rally is short covering. If that is the case, what doinvestors and traders do? Just wait? - Bill

With the VIX trading at these low levels, what is the best way to playit? VXX? Calls? - Ron

When some big investor jumps into a stock with a crazy lookingoption buy it seems to suggests something will happen fast. It

sounds like a no-brainer but obviously doesn't work 100% of thetime.

There’s been crazy option trading the past several days inACAS? Seems to me someone has bought around 20,000 - 25,000short duration calls recently (Mays and Junes). - Stan

Your Questions

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