Category Archives: CSCO

Spinning the Weekend

With about 2 hours before the beginning of the end of the week, here in Europe we’re down about 3%. The Euro is consolidating around 1.43 and vacationers are dribbling back into Paris. After yesterday’s list of bad news, today is likely to be calmer – though options expire today, so I’m curious how the VIX presents itself. I’m cleaning out of my expiring option positions today. USO, SPY, FSLR.

Yesterday’s rout of HPQ had to be the craziest, most complicated manipulation of an earnings announcement I’ve seen. I’m guessing they put weeks of effort into this strategy… Or someone completely screwed up… I’d like to know which!

  1. Leak to Bloomberg at noon (Bloomberg falls all over itself for about 3 hours…)
  2. Trading Stopped – confusion
  3. Autonomy confirms leaked rumors – Autonomy trades under AU (Gold…) in the UK and stock jumps 45%
  4. Trading stopped again – more confusion
  5. Earnings are released early.
  6. Stock jumps 3 points for about 10 minutes
  7. Stock starts falling and doesn’t stop… HPQ will open down 12% this morning.
I was thinking about selling straddles at the close, but didn’t get the chance.
Obviously some changes are being made and strategies revised at our favorite tech companies. GOOG is buying Motorola Mobility, CSCO is laying off and starting to re-focus on core competencies and AAPL is surfing the content/platform wave. Extrapolate a bit and we’re seeing “Software Companies” like Google, Microsoft and Facebook preparing to go after Apple, Hewlet Packard and Dell. “Hardware Companies” are desperately trying to get in on the party.
This is a fundamental shift. Eventually we’ll stop referring to them as hardware and software companies, but with words like platform, infrastructure, and service. They might one day be considered conglomerates like TYCO and GE. MSFT is well on it’s way IBM is almost there, but markets will take some time to get used to innovators turning into conglomerates. The markets are just starting to digest this shift. These conglomerates will outsource innovation and start to pay dividends.
I’m going to get lunch, more later!

Cisco Contrarian Thinking

I read a well written post this morning on Ebeling Heffernan about Cisco’s earnings, due today after the close. The post lists the things working against Cisco:

  • Peer Performance – JNPR, BRCD, RVBD are all crashing…
  • Management and Restructuring Signals – Mediocre Management…
  • Austerity Order Risk – Governments aren’t buying…
  • Buy Back vs. Dividend Strategy – Buy back is worse…(?)

But Mr. Ebeling, Jr. fairly points out that at 8 – 9 times earnings Cisco might be on the extreme end of it’s ‘turn-a-round’.

Each time CSCO releases earnings, I try to find a good setup. My track record isn’t great and I hesitate to jump in again. As I mentioned in my post on July 18th we’re seeing concrete changes finally. So should we continue to play with this falling knife? It’s likely to dissappoint, again.

I’m going to buy stock. I’ve worked with their product and have confidence in it. That’s no trading strategy, but I’ll add a little stock today, for that reason only.  Isn’t that why we have the stock market? Under 14 looks cheap. I’m avoiding the options, unless I can come up with a decent spread.

Bear Market Specials

The VIX closing at it’s highs today at over 46 and the talking heads are spewing armageddon. I’ve heard: “falling off the cliff”,  “throwing the baby out with the bathwater”, and “big and bold” too many times today. I bought a few lottery tickets, with all the group pessimism, I couldn’t resist buying some calls and buying some large cap stocks today (AA, CSCO, F ).

The most surprising (for me) non-mover today was the Euro. I was expecting more downside and continue to expect it to break under 1.40.

There’s lots of attention on the Fed tomorrow.

With each soundbyte I cringe.

(Wikipedia on “To Throw out the baby with the bath water“. They say it’s origin is German…)

Branding Diallo

The Guardian (and all the other major news outlets) continues reporting on DSK’s accuser; she’s not in it for the money. The lawyers, PR people, and talking-heads are following the roadshow of Nafissatou Diallo. It’s her turn…

Syria is stepping up raids while the world is distracted with sovereign debt.

Goldman Sachs (GS) upgrades Cisco (Street Insider)? We are starting to see concrete actions from Cisco, but with the Goldman upgrade I’m sceptical, again. This week $JNPR took a good 10% hit so what’s the strategy here??? Large institutional investors have a particular interest in seeing CSCO start to move. 66% is institutionally owned. Guessing 15 is the magic red-flag number.

Mediapart sheds some light on political advantage in the French Senate. Ongoing frustration with the priveleged class, and where they get the extra money… (Le Sénat distribue un million d’euros d’indemnités cachées à ses “dignitaires”)

Deadline fatigue… More after lunch!

I’ve eaten, and I still have deadline fatique… More after coffee?

Coffee and a freshman press conference. It lingers, still.

Macro vs. Micro

Playing this market recently has come down to two problems: debt (macro) vs. earnings (micro). On the earnings front, you’ve a lot to follow, even in a down market. Finding strong cash flow, strong balance sheets, small/mid/large cap hasn’t been so difficult. The issue is unemployment and the ongoing macro problems keeping a lid on the continued release of positive earnings.

If you read this blog you’ll know that I’m distracted by technology stocks.

Any good news on the debt (macro) front is going to boost this market. That’s the prevailing sense and logically, good news should boost the market. We’ve waited so long now that the pop will be a good one. The truth is good news could come from either the US or Europe. That news doesn’t even need to be ‘super good’, just ‘decent’. Whether it is valid/real or not is another discussion… It probably won’t be, but that’s for traders with a longer term vision than mine. The reality is that the US will have an easier time releasing decent news and sooner (or later) the Republicans will get off their high horse. I’m embarrassed with that debate. But again it’ll be ‘easier’ for the US to lead the markets here. The EU is turning in circles and it’s the summer… Here’s a good graphic explaining the risk of banking and trade contagion. (The Washington Post)

So what should you trade in this market? Fundamentally, any good news will have a stronger positive effect than normal. Earning plays are working very well now. I’d watch option volumes closely before earnings and play long straddles. WYNN was hot today and is a good example. GOOG was another last week. Three stocks that release tomorrow after the close: AAPL, VMW, and YHOO would be good ones to consider. YHOO though is seeing lots of short interest. Be careful. The run up in AAPL today gives you an idea of expectations. I’m staying away from Financials which are being strongly effected by the worldwide macro worries but playing SLV and GLD in response.