I think I was right on the money last week when I said:
The bar for corporate earnings is still set at very easy to beat levels yet, like this limbo-playing child, when they announce their beats of very low expectations we’re going to get all excited and tell them how great they are doing. The problem is, these are not kids who we hope may grow up one day to be President or CEOs of major companies. these ARE CEOs of major companies and they are being paid top salaries for top performance and we, the stock purchasing public, are paying top dollar for what should be SPECTACULAR performance, not beating 75% off last year’s earnings by a penny!
In that post, I rattled off a list of stocks that seemed overpriced to me: AMZN, BIDU, AM, PALM, NFLX, PCLN, URBN, UHS, CERN, CREE, GMCR, CY, SWM, TRLG, BKE and you would have had a fabulous week just shorting those stocks as only NFLX, URBN and CREE stayed positive. Now most newsletter writers would quit right there and make a giant ad saying they were 12 for 15 on the week but, as our members know, THAT’S NO BIG DEAL AT PSW! I’m just going to remind members that they can refer friends to FREE advice like that in our trial newsletter and earn 20% of more off their subscriptions for doing it.
Picking stocks is easy but a few percent here and a few percent there isn’t much fun is it? On that list, the two we attacked were AMZN and BIDU, both of which ran (in our opinion) way too high AND had very liquid and very overpriced call options that we could sell to collect premiums. We had set up BIDU the week before, selling Oct $420 calls for $8.30 and the Oct $430 calls for $7,20. While both went higher on Monday, the fact that we had a plan for managing the trade kept us from panicking and, thankfully, Monday was the only day those positions gave us trouble and both finished the week worthless (100% profit for us).
Adjusting our positions kept us busy this week as we STILL have a slightly bearish bias and I apologize for that but, as I said in Friday’s post: Every time I try to get a little more bullish, they pull me back in! It’s the curse of being a funamentalist, it’s not enough to show us a shiny box with a pretty…