Archive for the 'Trades' Category

Looking at FPIC

Posted on July 20, 2009, 10:33 am. Closed

I just initiated a small position in FPIC, a provider of medical professional liability insurance primarily (catering primarily to Florida). This might be just a trade for me, but I feel FPIC has the potential to be a rewarding long-term investment.

Here are some things that I like about FPIC:

P/B ratio is 0.89
Insiders own 3.65% of outstanding shares
Book value per share has grown at a rate of 7.6% over the past 11 years
Combined ratio (underwriting profitability) has remained under 100% since 2001 and has declined since then to 80% — a really good thing!
Big repurchaser of their own shares — shares outstanding have decreased from 10.43 million in ’06 to 7.66 million today
Medical professionals will always need insurance!

I will be doing some more research into the history of FPIC. Right now the only thing I don’t like too much about FPIC is the fact that they are heavily reliant on Florida, but this could be a good thing as this is a niche for them and therefore it might be extremely hard for other insurers to steal their market share in Florida. Also, FPIC’s dominance in Florida means they can only expand outward into other states in the South.

FFH’s Pullback an Opportunity for Those who Missed March Lows

Posted on May 13, 2009, 9:40 pm. Closed

Today Fairfax Financial Holdings (FFH) dropped below 250 today and closed at 252.79 filling a gap created in late April. I got in at 250.50.

FFH is a Canadian holding company with subsidiaries involved in P&C insurance, reinsurance, and investment management. Prem Watsa, the founder, chairman, and CEO, has been called the “Canadian Warren Buffett.”

From a technical perspective, I think this pullback is a good buying opportunity. The price is sitting at resistance of a trend line and also a fibonacci line.

(Click image for larger size)

From a fundamental perspective, FFH is also a good buy. I believe Watsa is an excellent investor whose interests are aligned with shareholders. FFH has grown its book value at 6.3% for the past seven years and right now is trading at a 0.9 P/B ratio.

One thing I don’t like about FFH is that for 2008 it had a 110.1% combined ratio (underwriting profitability – below 100 means underwriting is profitable, above 100 means underwriting is unprofitable). However, 2008 was a pretty insane year for any financial company, so I’m willing to overlook 2008 as a once in a lifetime event.

With this most recent quarter, there is evidence of improvement as FFH has shown a combined ratio of 98.7% compared to 99.7% for the first quarter a year ago. I believe FFH and its subsidiaries are committed to profitable underwriting and I believe FFH is both a good long-term holding (or a short-term trade) at this price level, especially if you were too afraid to buy in at the March lows.

If you’re interested in FFH, I reccomend some due diligence. Look through the yearly reports and google for news on Prem Watsa. I guarantee this will be educational even if you don’t invest in FFH.

Technical Analysis: United Rentals

Posted on January 28, 2009, 12:04 am. Closed

I haven’t done any short term technical analysis for a long time, so here’s a chart that looks interesting to me.

Disclosure: I own URI via the Fairholme Fund.

Going Long on Oil

Posted on January 14, 2009, 5:18 pm. Closed

After thinking and reading for almost three weeks on whether oil and oil producers were a good value, today I felt good and made some trades. Today I sold my position in FXP (basically an ETF that shorts the FTSE/Xinhua China 25 index) and used the proceeds to purchase DIG and USO, two etfs that track oil and oil producer indexes.

The chart shows the two etfs side by side. The top shows a two year view and the bottom shows a six month view. The green circles are where I made purchases.

ABX: This is How You Trade!

Posted on October 3, 2008, 8:20 am. Closed

For the first time in a while I did some options trading this week. Here is my process: Find a chart that looks good. Formulate a hypothesis. Purchase option at the money or in the money two months out at the very least. Set intelligent stops to limit losses. Wait and see.

On Tuesday of this week I thought the chart for ABX looked good for shorting. My hypothesis was that ABX would fall from $38-39 to about $32 in about a week or so. I purchased two ATM puts on Wednesday. I set my stops at $39.69, the high for past couple of days. Then I did not have to wait long. ABX fell %14.53 in a day! I sold one option when ABX was down %10 and the other option when ABX was down %14.

Totally awesome

Some Current Contrarian Investing and Trading Tips

Posted on August 10, 2008, 11:08 pm. Closed

If you’re a trader, Gold Stock Bull lists three areas where one should probably be able to profit: financials, the dollar, and energy. With energy, Petrobras is the particular stock mentioned right now that seems to be a both a good trading and investing opportunity.

I also agree with the general outlook on energy. Oil was greatly overvalued, but now it seems that there has been an over-correction. But perhaps not, as I have been hearing that there is some evidence of a greater worldwide economic slowdown, and thus a decrease in demand for energy.

Presidential Election Spreads

Posted on June 18, 2008, 1:00 pm. Closed

Currently, by the RCP Average, Obama is expected to take 46.8% of the vote and McCain 42.8%, which means there is a spread of 4 points. However, at Intrade, Obama is trading at 63 and McCain at 33.5, a huge spread of 29.5 points.

Here are the intrade charts:

If I were a betting man, I would bet that this spread will narrow as Novemeber approaches. I bet if you sold Obama and bought McCain, you’d be able to make a nice profit when you cash out a week before the election. Of course, this idea works best if McCain can make it to the election still alive. If McCain didn’t make it to election day for some reason, you’d have a big loss on your hands.

BUCY and PCP

Posted on April 15, 2008, 7:48 am. Closed

It was a long weekend for me. Drove up to Chattanooga, Tennessee with three of my teammates to compete in some bicycle races. Here are two charts that look good to me.

This is a chart of BUCY. I like it because it looks as though it is topping out and it is also very close to the top of its trend channel. Intermediate target price is $85.31 and longer term target would be approximately $67.

This is a chart of PCP. It’s broken several trend lines and I expect it to go lower. I know nothing about this company at all, but just going by the name, it seems to be involved in manufacturing precision castparts. With a global economic slowdown currently underway, I suspect demand for such things will fall. First target price is around $92.50 with a long term target of $75.

Three Trades for April 10, 2008

Posted on April 11, 2008, 8:49 am. Closed

I sold into the strength yesterday, perhaps a little recklessly considering how utterly unpredictable the market has become, but I saw two charts trading at or near the top of trend channels and the third trade was in response to the retail sector’s large bounce after Walmart’s report.

Here we have DVN, at the top of its trend channel.

Here is a chart of Medtronic, MDT. Not a terribly strong stock, nor at a very extreme level, but I still thought it was worth a shot.

This is RTH, the etf for the retail sector. I had a put previously, but sold for a profit at 92. I thought yesterday was a good chance to reload.

J.P. Morgan and Bear Stearns Craziness Continues

Posted on March 25, 2008, 11:02 am. Closed

When I read the news that J.P. Morgan had upped its bid for Bear Stearns from $2 a share to $10 a share I felt like I would be one of the few who would consider such news BAD, as opposed to GOOD. If JPM had to be bribed to take on Bear Stearns assets, why would paying more be a good thing? And by the way, JPM is now on the hook for just the first billion in losses that might occur from Bear Stearns assets. Formerly, I think JPM was on the hook for zero losses.

Anyways, I just want to show you this chart of JPM with its insane megaphone. I was short JPM as of yesterday.