Investiv Daily

12 May
Tesla: Why I’m Not Short Or Long
Tesla’s stock has gone up 10 times in the last 5 years which is a wonderful performance for an unprofitable company.

It’s very difficult to calculate the future cash flows, but factoring in increased competition hardly justifies the current market capitalization.

Tesla is perhaps a once in a life-time investment where the profitability, return on investment, dividends, etc., don’t matter at all. All that matters is to make this a better world and for you to become part of history!

Introduction

Tesla (Nasdaq: TSLA) is clearly the most exciting stock and company in the current market.

I really admire Elon Musk, both for what he has done and for what he is trying to do. However, admiration and excitement aren’t the best fundamental indicators to make an investment on.

Today we’ll discuss common sense investing, which should be the process of attaching a number (fair stock price) to the probabilities of various outcomes, and ‘change the world’ investing where anything is possible. More →
By Sven Carlin Investiv Daily Tesla
11 May
Sven’s View On Options
Options allow for outsized returns, but unlike most stocks, they can also lead to unlimited losses or a total loss of the investment in the best case negative scenario.

However, returns of 1,000% aren’t rare and options are a great way to increase your income or protect your returns.

As options have an expiration date and some carry unlimited risks, you should really only use them if you know what you are doing.

Introduction

An Investiv Daily subscriber recently asked me what I think about options as I never write about them.

Options have become very attractive in this environment of low dividend yields and high price to earnings (P/E) ratios, especially for those who want to achieve extra income by writing options (writing an option involves opening an option position with the sale of a contract where the buyer gets the right to buy or sell a certain stock at a certain price for a period of time while the seller gets the option premium).

Today we’ll discuss options, different types of options, how can they be used, and when and who should use them. More →
By Sven Carlin Investing Strategy Investiv Daily Options
10 May
The Trouble The Market Refuses To See
GDP growth is at three year lows, car sales have dropped 11%, and the biggest sector contributing to new employment is about to go into oversupply.

The FED is in a stalemate situation. It should raise interest rates and deleverage, but it’s already too late as the economy, government, and population is hooked on low interest rates.

Introduction

The market’s behavior reminds me of the three wise monkeys. One doesn’t see, the other doesn’t speak, and the third doesn’t hear. The VIX index, a measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices, indicates that investors expect stability and didn’t even react to the bad news coming from the automotive industry, jobs, and a very important bankruptcy. More →
By Sven Carlin Auto Industry Interest Rates Investiv Daily Jobs Report US Economy Volatility
09 May
Investment Research: The Challenge of Finding Attractive Investments
Bargains can be found through book value, special situations, 52 week lows, merger arbitrages, bankruptcies, etc.

It’s necessary to be a contrarian to be a value investor, though it might be painful for a while.

With experience, it will take less and less time to assess a stock and whether it has the potential to be a good investment.

Introduction

Last week we discussed Klarman’s view on the best business valuation methods. You can find the article here. Today we’ll discuss his approach to investment research.

Studying fairly priced securities won’t get you far because you’re competing with thousands of others who have researched those companies and, especially in the current market environment, if there is anything worth owning, it will probably be expensive. Therefore, to find bargain investments, an investor has to look where others aren’t looking or refuse to look. More →
By Sven Carlin Buybacks Commodities Contrarian Herd Behavior Investing Strategy Investiv Daily Seth Klarman
08 May
Heuristic Simplification Makes Everyone Happier, But It’s Terrible For Investing
Irrational behavior leads to higher risks and lower returns. We’ll show how to avoid it.

We’ll describe how a cognitive bias can be extremely dangerous in the current market environment.

Introduction

Standard finance assumes that investors always behave rationally and therefore it ignores cognitive and emotional biases that might affect investor behavior. But such phycological biases don’t only affect the individual investor, but can also affect the majority of the investing population. When the majority of investors behave irrationally, the market becomes inefficient and extremely dangerous as risks increase and longer-term returns turn negative.

Today, I’ll describe the most common psychological bias affecting investors and making them behave irrationally. More →
By Sven Carlin Heuristic Simplification Investing Strategy Investiv Daily Nasdaq Recession
07 May

Sunday Edition: When AMD’s Chart Was A Crystal Ball

A few weeks ago I wrote an article for our sister publication Direction Alerts about a technical pattern I had spotted on semiconductor company AMD.

What I had found at the time was a head and shoulders formation that I determined would see the stock price falling and giving investors an opportunity to buy this growth stock at a discount. More →

By Kristina Keene AMD Fibonacci Retracements Investing Strategy Investiv Daily Sunday Edition Technical Analysis
05 May
The Market Is Dumb And Getting Dumber
The number of analysts is declining, stocks don’t react to earnings nor news anymore, and the underlying economic environment is rigged.

However, as investors, we have to always look at risk and reward as there is always a way to profit.

Protecting yourself from market ignorance doesn’t even cost much.

Introduction

I would define a dumb investor as one who doesn’t think about risk in relation to reward, and therefore I fearlessly say: the majority of investors are behaving in a pretty dumb way.

This is a heavy statement, especially considering markets have performed nothing short of spectacularly in the last 8 years. As evidence, the S&P 500 is up three-fold since 2009 and continues to strongly march ahead. More →
By Sven Carlin Buybacks Corporate Earnings ETFs FED Interest Rates Investiv Daily S&P 500
04 May
Here’s What Happens When An ETF Gets Too Big
When an ETF owns more than 10% of a company, any kind of rebalancing can be very dangerous for the stock.

The VanEck Vectors Junior Gold Miners ETF is becoming too big for its index, and has been forced to look beyond junior miners and to sell up to 50% of some of its positions in order to rebalance.

The main danger coming from ETFs is the lack of underlying liquidity, especially when there is no one to buy the assets sold in a fire sale.

Introduction

ETFs are potential vehicles of mass destruction. There is a high chance that in a few years from now, we’ll be talking about the 2000 dot-com bubble, the 2009 subprime crisis, and the 201X ETF liquidity crisis.

After ETFs took the investment stage, there weren’t many issues with them as they remained relatively small. However, the continuous inflow of capital has already made some ETFs too big.

In today’s article, we’ll describe the issue with the VanEck Vectors Junior Gold Miners ETF (NYSEARCA: GDXJ) and how it’s affecting index constituents. More →
By Sven Carlin Commodities ETFs Gold Investiv Daily
03 May
Think Only Brick & Mortar Retail Is In Trouble? Think Again.
The number of bankruptcies in retail is increasing and the probability of new bankruptcies is still high.

In the online environment, the competition is intensifying their efforts precisely at the moment when Amazon has finally reached some kind of profitability.

Price wars could make the whole online growth story a bad experience for investors. We’ll use Wayfair as an example.

Introduction

We’re seeing significant structural shifts in the retail environment where companies that were once considered blue chips are slowly going bankrupt, think Sears Holdings (NASDAQ: SHLD), while online retailer Amazon (NASDAQ: AMZN) is crushing it.

The question many ask is: are retailers cheap now and online retailers expensive, or is it the other way around? To answer this question, it’s extremely important to look at how the competition in the online space will affect margins. We’ll look at some situations and try to come to the best option for your portfolio. More →
By Sven Carlin Amazon Investiv Daily Retail
02 May
The Art Of Business Valuation – Three Valuable Valuation Methods
Don’t expect precision from business valuation, but accuracy helps a lot.

Calculating net present values, liquidation values, and stock market values are the best methods to use according to Klarman.

Introduction

Today, we’re really digging into the essence of Seth Klarman’s book Margin of Safety.

Some think the market, being efficient, will tell you the exact value of a business, but history has shown that in the short term it often happens that the market values businesses extremely irrationally, either on the upside or on the downside. Knowing how to properly value a business gives an investor the perfect investing edge as it allows them to disregard what the market thinks and turn that into their own advantage by exploiting market mispricings.

Let’s see what Klarman has to say about business valuation by going through chapter 8 of his book. More →
By Sven Carlin Investing Strategy Investiv Daily Seth Klarman Valuations