Vindicated... Tesla down huge on earnings... Shale companies still soaring... A hyped IPO... 'The most profitable trade of my career'... See Steve Sjuggerud live – tonight... Back on Social Security...
Vindicated...
We've warned against buying shares of electric-car manufacturer Tesla all the way up.
Buying momentum has its benefits... A hot stock can soar higher than even the most bullish estimates.
But if there are no realistic growth prospects to back up an obscene valuation, look out below.
At its February peak, Tesla was trading for around 14 times sales – an astronomical valuation for a $31 billion company.
The stock price is down 27.4% since then...
The company beat earnings estimates yesterday, reporting a profit of $0.12 per share versus forecasts for $0.08 (the company lost $49.8 million without adjustments), but the stock still tumbled over 6% to $188.
The company also increased revenue to $713 million versus expectations of $684 million.
Various analysts covering Tesla cited different disappointments with the announcement... JPMorgan wasn't impressed with future guidance. Morgan Stanley was worried Tesla may fail to obtain a partner for its "gigafactory" – the company currently has a letter of intent with Panasonic.
That's the thing with a growth stock that's priced for perfection – in Tesla's case, more than 130 times forward earnings. Any result but perfection will cause the bottom to fall out.
We've seen it a number of times...
Consider coffee chain Starbucks in 1999... From 1992 to 1999, Starbucks shares increased from $1 to around $10 – a 900% return.
But in June 1999, caught up in the Internet mania, Starbucks' founder Howard Schultz announced plans to create Starbucks X... a semi-separate division built around the Internet.
But Wall Street didn't like it. A month later, the company reported disappointing quarterly earnings. Shares dropped 20% in one day.
Of course, shares of Starbucks rose later... And so may be the case with Tesla. But we'll still wait for a more realistic valuation.
Meanwhile, our energy recommendations are on fire...
Yesterday, we noted the bullish numbers from one of the most dominant shale-oil producers in the U.S. – EOG Resources.
Yesterday, fellow shale giant (and Stansberry's Investment Advisory holding) Devon Energy hit its highest price since 2008 on solid earnings. The company announced a first-quarter profit of $324 million, compared with a loss of $1.3 billion a year ago. The company's oil and gas output increased to 690,900 barrels of oil equivalent (boe) per day, up from 686,900 boe per day a year ago.
In a note to clients, energy-focused investment bank Simmons & Co. said, "Devon appears to be making progress across its core portfolio." Production in the Permian Basin grew 6% compared with a 9% growth in overall oil production.
To boost its shale production, Devon spent $6 billion in February to buy oil-producing assets in the Eagle Ford shale.
Investment Advisory subscribers are up 26% since 2012 on Devon.
As oil production in the Eagle Ford increases, the value of the land also increases. Just yesterday, for example, Freeport-McMoRan (FCX) sold its Eagle Ford assets to energy producer Encana for $3.1 billion (68,000 per net acre). And that's one reason these stocks are performing so well today.
S&A Resource Report recommendation Penn Virginia – which also owns property in the Eagle Ford – spiked 10%, presumably on excitement from the Freeport/Encana deal. Editor Matt Badiali recommended Penn Virginia in the October 2013 S&A Resource Report:
|
Today, Penn Virginia is a $1.1 billion company... S&A Resource Report readers are up 166% in less than a year.
Another Resource Report shale recommendation, Halcón Resources, is up 11% today on solid earnings. Halcón is run by Floyd Wilson, one of the pioneering CEOs in the Eagle Ford. He's the former CEO of PetroHawk Energy, which he sold to BHP Billiton for $12 billion.
As Matt wrote in the April 2014 S&A Resource Report:
|
Resource Report readers are up nearly 36% in a little more than a month on the position.
We're about to see one of the largest initial public offerings (IPOs) in history...
China's version of Amazon, Alibaba, is going public in the U.S. Alibaba controls 80% of all e-commerce in China... And analysts estimate its IPO could value the company at more than $200 billion (Amazon is a $134 billion company, for comparison). That would dwarf Facebook's $104 billion IPO in 2012.
But here's where it gets interesting...
Yahoo bought 40% of Alibaba in 2005 for $1 billion. And it's selling one-third of its now 22.6% stake through the IPO. But the market isn't correctly valuing Yahoo's holdings...
If Alibaba is valued at $200 billion when it goes public, Yahoo's stake will be worth $48 billion.At the current price of just about $34 per share, Yahoo's entire market capitalization is just $35 billion. In other words, investors buying Yahoo today are buying the stock more than 27% below the value of its Alibaba ownership... and getting the rest of the company for free.
S&A Short Report editor Jeff Clark has constructed an options trade to profit from this mispricing when Alibaba goes public... And he thinks his Short Report subscribers could double their investment in a short period of time. It's an aggressive trade... But Jeff has been in this position before.
He made a similar trade in February 2000 on a certain technology company... And it was the most profitable trade of his career.
Today is your last chance to sign up for Steve Sjuggerud's live webinar explaining his "C.H.U." strategy... It's the strategy he uses to produce large and consistent gains in his True Wealth Systems advisory.
True Wealth Systems is Steve's trading service based on a sophisticated computer system, designed to quantify myriad strategies he's developed over his career. Steve spent years and millions of dollars (not to mention collaborating with several brilliant mathematicians) developing this strategy... And tonight at 8 p.m. Eastern time, he's pulling back the curtain...
It's completely free to watch. And just for signing up, we're giving you a copy of Steve's Little Book of Low Downside High Upside Trading Models.
To sign up, click here...
You see, according to our TWS computers, Greek stocks are extremely cheap relative to Greek bonds right now. Long-term interest rates in Greece have fallen from around 40% to around 6% in just a couple years, making Greek stocks look attractive today.
Yes, Greek stocks were extremely cheap when the economy was falling off a cliff... And they have since soared more than 100%. But relative to interest rates, Greek stocks are an incredible value today. And even though Greek stocks are up triple digits, the dramatic fall in interest rates still gives them tremendous upside potential from here.
Greek stocks also now have a solid uptrend in place, according to our computers. Lastly, our TWS computers show that a laundry list of indicators are currently going from "bad" to "less bad" – which is exactly when you want to buy to make the biggest gains.
New 52-week highs (as of 5/7/14): Brookfield Asset Management (BAM), Chesapeake Energy (CHK), C&J Energy Services (CJES), Calpine (CPN), Carrizo Oil & Gas (CRZO), CVS Caremark (CVS), ProShares Ultra Oil & Gas Fund (DIG), Devon Energy (DVN), Eni (E), Energy Transfer Equity (ETE), 3M (MMM), Penn Virginia (PVA), Targa Resources (TRGP), Travelers (TRV), Walgreens (WAG), W.R. Berkley (WRB), and ExxonMobil (XOM).
Our mailbag was light... But today we're publishing feedback on Social Security – one of our most hotly debated topics. Let the angry e-mails commence... send them to feedback@stansberryresearch.com.
"So your mailbag is light – maybe it is time to talk about Social Security again? Maybe this story will help. I am in agreement with Porter's stance on the Ponzi scheme, as is my cousin.
Despite his agreement however, my one-percenter cousin still collects his Social Security check saying 'Well I paid in to it so I deserve to get it back!' He also just forwarded me an e-mail that decries the fact that Social Security is considered a federal benefit as opposed to something that is ours to begin with.
"I understand this sentiment; we've been brainwashed by politicians since the inception of this program. But correct me if I am wrong, the first recipients of Social Security didn't pay into it, right? How did the people back then not see that this was welfare through and through? For that matter, until recently I was guilty of not realizing that I myself am a recipient of numerous forms of welfare, like mortgage interest tax deductions and child tax credits. Most of us are hooked on government handouts and don't even know it.
"To anyone who will listen, I have declared that the only way we will solve our entitlement problem (without catastrophe) in this country is if a whole generation stands up and rescinds their rights to them and then ends the program(s). I figure this will never happen [laugh], but when a one-percenter still collects his Social Security check saying 'well I deserve it,' I know it will never happen." – Anonymous
Goldsmith comment: Porter has never shied from sharing his thoughts on the crime of Social Security. It earns him a lot of criticism. We compiled some of his analysis here.
Sean Goldsmith
New York, New York
May 8, 2014
Sjuggerud's MAJOR contrarian call...
True Wealth Systems editor Steve Sjuggerud says his key indicators are flashing "buy" for one of the most hated markets in the world... But based on history, this opportunity could return triple digits.
To subscribe to Digest Premium and access today's analysis, click here.
Sjuggerud's MAJOR contrarian call...
Editor's note: In the May issue of True Wealth Systems, editor Steve Sjuggerud showed his subscribers how to pocket 24.8% compound annual gains in Greek stocks with one click of your mouse. In today's Digest Premium, we're sharing an excerpt from that issue... In it, Steve discusses the country's current investment landscape...
George Papaconstantinou took the job as the Greek Finance Minister in October 2009. He quickly discovered a world of government lies...
When he arrived on the job, Greece's official budget deficit was 3.7% of gross domestic product (GDP).
The real deficit, George discovered, was more like 14% of GDP.
This wasn't a one-off event...
Greece's government had lied about these numbers before in order to join [the European currency union] and adopt the euro... And the reality is, its government has lied to its people for generations. (The terrible history since World War II of Greece's old currency, the drachma, is proof of this. If you had put $1 million into the drachma 70 years ago, you'd have a tenth of a cent today.)
George knew he had to cut government spending and bring in more tax revenues to fix Greece's financial woes. And he knew the people of Greece wouldn't like it.
They didn't...
Hundreds of thousands of people filled the streets of the country's capital, Athens, in May 2010 to protest. The protests quickly turned violent.
Several protestors set fire to a nearby bank. They hurled numerous Molotov cocktails into the building. Most of the bank's employees escaped. But several died that day as the fire engulfed the building.
This is just one example of the protests that were happening at the time. In short, Greece was crumbling. It was downgraded from a "developed country" to an "emerging market" by MSCI, the world's leader in global stock market indexes. It was the first time MSCI had downgraded a country.
Greece was broke. Everyone knew it. So nobody wanted to lend it money. Interest rates on Greece's existing debt skyrocketed.
The country was in a terrible position, with default on its debt imminent. Greece needed a bailout. And it got it... From 2010 to 2012, Greece received a total of 237 billion euros in bailout money.
Since then, we've seen an amazing turn of events...
Last month, Greece sold government bonds for the first time since 2010. It sold 3 billion euros at – get this – a 4.75% interest rate for five years.
Amazingly, Greece's bond offer was massively oversubscribed – investors couldn't get enough.
"The reception of the five-year bond has exceeded all expectation," Greece's Prime Minister Antonis Samaras said after the bond sale. "International markets have expressed, beyond any possible doubt, their confidence in the Greek economy."
Investors are convinced Greece has turned around... But what do you think?
I am skeptical... I personally wouldn't lend Greece money for five years at 5% interest. Would you?
I would much rather make a local loan on a property here in Florida, for example, than lend the Greek government money at 5%.
And I don't have plans to put money there for the long term – ever.
Editor's note: Steve Sjuggerud is going to share some of the secrets behind his True Wealth Systems strategy tonight at 8 p.m. Eastern time on a live webinar. It's free to attend... Just sign up here...
Sjuggerud's MAJOR contrarian call...
True Wealth Systems editor Steve Sjuggerud says his key indicators are flashing "buy" for one of the most hated markets in the world... But based on history, this opportunity could return triple digits.
To continue reading, scroll down or click here.