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| Trader Wizard Perspective Daily global capital markets advice "Blog" posted before the NYSE morning bell and throughout the trading day. | ||
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| Who is Trader Wizard? | ||
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| Trader Wizard's Mission
My goal with this Ezine, other than enjoying the challenge of a weekly ‘buy or sell’ recommendation, is to continue the independent investor information, education and facilitation process started with Trader Wizard. | ||
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| Articles by Trader Wizard | ||
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Week 47 In Review Letter to TW Networker Angelo TW’s Daily Show: Dec 3 Canadian Stocks Trader Monthly “Unnecessary Trauma” Gold is Not American Gold Prices to Zoom Barron’s Review of TW | ||
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| BUY or SELL Recommendation on Martha Stewart | |
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Marth Stewart (NYSE: MSO) Dec 3 close: $23.13 RECOMMENDATION: AVOID Among general reading, here is material I used to make this decision: EasyStock Interactive charts: Monthly, Weekly, Daily, and Hourly Data, and the Reuters data at Yahoo Finance. |
| The case for avoiding (the stock): | |
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1. Sharon Patrick, who was CEO until three weeks ago, resigned her Board of Directors position on Friday. Prudent investors look for stability in management and the Board, and the picture at Martha Stewart is unclear. 2. While the corporation is financially strong, operating margins and free cash flow have been crashing. Management and the Board need a thorough shake-up, and apparently changes are being made. Investors should stand aside until new policy is established in the corporation. As to recent insider sales of stock, I really pay little attention because, without looking at the names, I can figure out that those who knew they would or might be on the way out would be selling at a good price. 3. I believe the current stock price reflects the wild enthusiasm investors feel for the prospects that Reality TV mogul Mark Burnett is bringing to Martha Stewart’s dinner table, probably 2Q05. Investors are also anticipating a new book to be published by her soon after her release from prison. Normally, it makes good sense for speculative investors to buy on the anticipation, and sell on the event, but MSO has reached a stock price where MSO is now more speculation than investment. 4. With the past, present and possible future circumstances involving MSO, it is impossible for any reasonable person, no matter how shrewd an investor, to estimate future earnings or cash flow. Hence, target prices cannot be established with any degree of intellectual honesty. If you see these in the marketplace – from Wall Street or wherever – you ought to immediately strike that source from your reading list. Those people ought to be punting at the race trace because they are not well suited to capital markets. 5. Intermediate-term technical indicators (RSI, DMI and STO) have turned extremely bearish, and MACD, while moderately bearish, could join the others this week. When using technical indicators, the longer data series (monthlies and weeklies) are far more important to strategic decision-making than are the shorter ones like the daily’s, hourly’s and even shorter data series. The latter data is useful for trade execution purposes: When you make a decision with the help of longer term technical data (and fundamental, quantitative and economic data), that is a strategic decision. Just as important as strategy are tactics. Effective tactical decisions involve trade execution where you buy into weakness and sell into strength. Too many novice investors and traders make exactly the opposite and unsuccessful decision. As an analogy, they try windsurfing a ripple and get knocked over by the wave. 6. Investors get caught up in the sell-side’s fabrication of stories that may be ok, but you must filter out their appeal to your emotional hot buttons. “My” Martha makes great emotional fodder for some salespeople. If you allow your decisions to be based on your emotions and not your logic, then you are going to lose. Emotionally I’m trapped in the Martha story, but my brain tells me to play it safe. The yellow warning flags, in fact, have turned to a black flag for me. I’m headed to the pits. The MSO race is over, and it won’t begin for me until new management unveils hard details of the “new” Martha. That doesn’t stop me pulling for her emotionally for all the reasons I have stated in TW this week and previously. I would like to think Martha herself would have a bearable Christmas knowing that serious investors like me will return to the fold when she gets her feet back on the ground. I often quote Ecclesiastes 3: “There is a time…” It is my favorite biblical scripture, and I look to that in believing that for Martha there will again be a time. |
| The case for accumulating (the stock): | |
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1. There are few media geniuses like Steven Spielberg and David E. Kelley, but Mark Burnett has already done enough to join that crowd. To get to that exalted level, the person must understand people better than most anybody else. “Survivor” and “The Apprentice” have proven that Burnett knows what people want in their TV entertainment, which he delivers, but he gives us even more – a social laboratory. If we watch his “reality” shows, we can also learn a lot about life, and that, I think, is his genius. Burnett has recognized the genius of Martha Stewart the person, like he did with The Donald, and therefore speculators have good reason to expect the results of their collaboration to bear fruit in future seasons. |
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