(P&I) The Catch Of The Day

The Dollar Table For Investment Consumers

Drama. The “Catch Of The Day” are the seven “glam” stocks that we hear about almost every day – Google, Apple, Amazon, Facebook, Twitter, Netflix and Yahoo!- and they are like an ATM-machine for the stock market industry that loves to buy and sell them for us for just one reason and that reason is to “buy and sell them” for us like “trading cards” to investment consumers at the dollar-table (The Street, February 1, 2014, Jim Cramer: Why Did Apple Disappoint?).

For example, “We’re going to put you into Apple Incorporated. You know Apple, don’t you? And we can diversify you with a retail stock like Amazon.”

These stocks are great fodder for the “head and shoulders” and “dead cat bounce”-crowd but otherwise defy the fundamentals. Please see Exhibit 1 below.

Exhibit 1: NYSE “Catch Of The Day” – Fundamentals – February 2014

NYSE Catch Of The Day – Fundamentals – February 2014

The Undervalued Catch Of The Day – February 2014

These seven companies also employ about 300,000 people, mostly on the west coast, but engage the world. With a market value of $1.2 trillion, each employee checks in at $4 million and although they have lost $3 billion so far this year, investors gave them $300 billion last year and even a 1% change in their prices will recover, or drop, $12 billion.

Only Apple Incorporated pays a dividend and the aggregate payout was $11 billion for a 21% return of earnings (which were $53 billion last year) and an aggregate dividend yield of less than 1%. Obviously, they are not big on sharing and we have to wonder how investors will get their money back if not from each other.

Will they give us another $300 billion this year?

The question of the day is, Will investors give these companies another $300 billion this year as they did last year and the year before?

We have phrased the question in an unusual way because the Chart says that these stocks are overbought to the extent of $260 billion which is the difference between the current market value, $1,255 billion, and the same companies priced at the Risk Price (SF), $995 billion.

And the Chart also says that the demand for these stocks at these prices exceeds the supply – investors are unwilling to sell them for less, absent some significant event or trigger or need which will cause them to sell the stocks.

Investors in the secondary, post-IPO market, don’t usually think of themselves as giving money to the company; their interest is in receiving dividends and hoping that the company does not do anything that would discourage other investors from buying the stock from them at the same or higher price when they need or want to sell, both of which are liquidity concerns.

A high stock price, however, can benefit the companies themselves in several ways. The company could issue convertible preferred shares at a favourable rate which could, possibly, ease the “supply” problem over time; it could also make a rights offering or simply sell stock from the treasury stock, each of which has a different effect on the market perception of “liquidity” despite the fact that the companies in aggregate earned 21% on the shareholders equity which few shareholders are able to do with their own money through their own efforts.

We, therefore, have no idea whether the investors will give another $300 billion to the companies this year. Nevertheless, all seven of the companies are in the Perpetual Bond™ which returned +110% on them last year and our estimate of the downside in the portfolio due to the demonstrated volatility is minus (11%) absent some new surprise. In either case – unlike the future which has no precedent – we know what to do because we know where we are relative to the “price of risk“.

Please click on the links “NYSE Catch Of The Day – Prices & Portfolio” and “Portfolio & Cash Flow Summary” for the details.

Exhibit 2: (B)(N) NYSE Catch of the Day – Prices & Portfolio – February 2014

NYSE Catch Of The Day – Prices & Portfolio – February 2014

For more information on the chart elements and additional references to the theory, please see our Post, The RiskWerk Company Glossary.

And for more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in America, Big Oil, Shopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.