prev

Pinnacle (PNK): Buying More...

On 6/11 I introduced the timing of my 1st tranche of buying PNK in my fund. Fortunately, my process forces me to buy things in thirds. Process is born out of hard lessons learned. Bottoms in stocks are processes, not points.

PNK was down -8% today, to $10.75. Down eight percent is not bad when I look at a stock price that's down almost -70% from its 2007 high!

There is no doubt in my mind that PM's who got this one wrong are blowing it out into Q2 end performance reporting. Short interest is approaching 1/3 of the float, so the shorts are leaning on it here too.

I'll be buying more.

*Full Disclosure: I now own PNK in my fund.
KM

(Chart courtesy of stockcharts.com

Shuffle Master (SHFL): Buying some...

The stock is down -83% from where some of the "smart" hedge fund guys would pitch it to me as a long at "idea dinners" in 2006, and at 20% of the float, short interest continues to build to a level where the same hedge fund community now thinks "its a short to zero".

Additionally, 78% of the sell side's ratings on SHFL are now Hold/Underweight/Sell. In September of 06', according to Factset, 75% of the ratings were Buy + OverWeight!

My Partner, Todd Jordan, has edge here, and we don't think it's a zero. Buying it in the $5.91-$6.26 range is where I'd get more aggressive, but I bought 1/3 of a position in my fund today.
KM


(Chart courtesy of stockcharts.com)

Indian "Schemes"

Sandeep Singh, from the Hindustan Times wrote a great article today outlining the mathematical reality that 2 of 3 funds in India have delivered below 1% returns over the last 12 months.

While these returns are not funny, the language he uses is. Indians like calling investment funds "schemes". Maybe that's because thats what they, like tulips, turned out to be!

Singh highlights that "of the 170 equity schemes that have been in existence for more than a year, only 18 schemes (around 10 per cent) delivered returns of more than 10 per cent. Only a third of the schemes have outperformed Sensex which itself has grown by a mere 1.1 per cent over the past one year."

*Full Disclosure: I recently covered my short position in IFN.
KM

real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

Copper Update: Confusion Continues...

Today the Chinese Government flipped us over on our back again by providing more politically massaged "data", this time signaling decreasing copper demand.

The custom office reported May refined copper imports of 94,196 tons. Imported supplies are down -26% from the prior month. Copper futures sold off -0.5% today.

Below is a chart of copper prices/Chinese import data.

Andrew Barber
Director
Research Edge

Quote of the Day from the Head of Goldman's Quant Investments

Actually, according to Bloomberg's Tom Cahill, Goldman's Robert Litterman, (head of GS quant investments) said this at the GAIM Conference in Monaco on June 19th. Thankfully, I was not chasing "hedgies" around at this conference, so I am happy to take this quote on time delay...

"We couldn't get out and if we had it would have made it worse. We had to ride it out.'' -Bloomberg Article, June 24 ("Goldman's Global Alpha Fund Gains After 2007 Plunge")

Anyone remember 1987? Buler?

Liquidity remains one of the many reasons why the US stock market can bounce for a "Trade", but remains in a downward bear market "Trend".
KM

HSY - Milton could not possibly have seen the world as it is today

As I understand it, Milton Hershey left instructions to fund his charity "in perpetuity." As a result, the Hershey Trust takes the long-term view and doesn't factor in the in the daily ebbs and flows of the company and the market place. I'm reading between the lines of some recent statements made by members of the Hershey Trust.

How about looking at the past 30 years and the changes in the competitive landscape, which have make Hershey a niche player in the global confectionery market. Hershey competes against some of the strongest food and confectionery companies in the world. And the competition is only getting stronger following the recent merger of Mars-Wrigley and Cadbury's decision to focus on its core business. Also lurking are Nestle and Kraft Foods, who just love the fact that Hershey is in such disarray.

I don't think Milton Hershey would be very happy to see the mess his company is in. If he only knew that his company had become such an American Icon only to then be potentially destroyed by political pressures and archaic thinking. Today, the State of Pennsylvania claims a special relationship with the Hershey Trust, since it regulates charities. As a result, the trust can stand behind management mediocrity, citing Milton Hershey's intentions and state laws as a reason not to sell the company.

Hershey's competitors are adapting to the global nature of the confectionery business while Hershey is standing still. Although the company's new vision, which was revealed last week, is headed in the right direction, it will not create significant value for the trust or more importantly, shareholders. The U.S. confectionery business is not growing and the competition is tough and will not cede market share to anybody. So competitively, Hershey is in a position of weakness and does not hold a very good hand. The only way out is through a deal with Kraft, as the uproar that would be felt in Hershey, PA if a foreign firm bought Hershey would make such a deal nearly impossible. If Kraft were to buy a controlling stake in the company, the trust could get a couple of board seats, Milton's charity would be funded in perpetuity and the people of Hershey, PA would be happy.

The longer this goes on the worse it becomes for the trust and the people of Hershey, PA.


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

next