As 2014 draws to a close, it seems appropriate to go over some of the trading calls I’ve made since joining CalvinAyre.com in March. I will only go over long, short, and stay-away calls I have made on certain dates, and leave alone the maybes and the wait-and-sees where I did not commit to either bulls or bears.
As a reminder, when I do make trading calls, they are based on a combination of balance sheets (heavy debt and interest rate emphasis), earnings trends, and the monetary environment of any given country the company is located in. If all those factors line up either bullishly or bearishly, I make a call. Otherwise, I generally give both sides of the argument but don’t get involved in explicit predictions.
Let’s start off with my mistakes. There were two major ones. The first was Bwin.party (BPTY). I suggested that buying the dip on a negative earnings call back on March 13th would be a good move. It was not. While there was a short dip after those earnings were released to 123.14, the stock has continued to plummet from there and now trades at 104.90, for a loss of 15%. I have now soured on Bwin.party, and the last call I made was to hang on to a small position if you have one in case merger talks pan out, but don’t establish any new ones.
My second big mistake was Ladbrokes (LAD). I called a bottom too early on April 7 at 135.80. We are now at 108.90, for a loss of 20%. I still believe Ladbrokes will turn around next year, so if you still have a position, hold on to it. As I went over in my last piece on Ladbrokes, the digital market is finally showing some signs of life, and 2015 looks promising.
I’ve also made some washes since March. First, I was very negative on Boyd (BYD) on April 22, and the stock has gone up and down since then, leaving off pretty much where it was in late April. If we use the dates April 22 and December 16, the stock is down 10%. OK, but I expected a faster fall, and the stock continues to gyrate up and down. What has given Boyd some support are a recovering money supply and lower interest rates (for now) for its debt payments, but this will reverse yet and Boyd will continue falling considering its heavy debt load.
I knocked the Bally (BYO) merger with Scientific Games on September 23, and the stock has gone nowhere since. It’s only been 2 months, so the jury is still out on this one.
With Caesars, I advised to go short CZR on September 30th with long dated 2017 LEAP put options. The stock has crashed, recovered, and crashed again since then, with no net down trend yet. Hold on to the puts. They will be worth a lot in 2017 as Caesars continues to fall down several flights of debt default stairs.
I’ve made some good calls, too. Let’s start back on March 24 with IGT. At the time Hart has streamlining operations there, losing revenue but gaining earnings. It was enough to attract the attention of GTECH for a merger. Despite a dive after my bullish call, the stock is now up 15% since March 24.
One week later on March 31, I mocked King Digital Entertainment (KING) for pretty much being a stupid, conceited company with nothing of value to it. The short call at $18.19 took some time, but ultimately panned out. King is now at $15.46, for a gain of 15%.
One month later on April 22, I ripped Pinnacle (PNK) for what I saw as an irresponsible growth strategy and taking on too much debt. Though I made no explicit short call and the stock has been very volatile since then, it is ultimately down for the year at new 52-week lows.
In the same article, Penn National Gaming (PENN) was my pick instead of Pinnacle, though I wasn’t overly positive about it. Just if you had to pick between the two, Penn was better. Their growth strategy is more sober and manageable. If you bought your entire position exactly on April 22 it’s a wash, but if you scaled in gradually over that week you’d be up around 10-15%.
Amaya (AYA) was an indisputable grand slam. I was very positive on Amaya despite losses on April 29, as both a long and short term pick, but I had no idea it would be such an amazing investment or that it would acquire PokerStars. When that piece was published, Amaya was at $6.80. It is now just below $30 for a gain of 340%, and that’s after a sharp drop from recent highs at $37.87.
Melco Crown (MPEL), while I had some nice things to say about it, I was not into buying the company. Melco crown would be infected by the Macau slowdown on the horizon, and it was. I cited it as a good short term pick at $33.50 back in mid May but to get out at any sign of trouble. I am no short term timer but depending on how you timed it, there was a bounce into early June to $37 and then a steady fall to the current price of $23. In any case the prudent thing to do was to avoid it, which turned out to be the right move. Even though I praised the company in September for its efficiency, I still warned to stay away due to the macro conditions in Macau, and that the stock would suffer regardless of how good its bottom line was. It is still down since September.
On July 15, in an article mostly making fun of politicians, I noted very weak money supply numbers. In the last paragraph of that article, I wrote:
Three weeks from July 15th is August 5. Since then, the gaming ETF BJK was at $49.53. It’s now just below $40, a gain of close to 20% for shorts. Money supply growth has recovered. Time to cover.
Perhaps my most persistent call, all the way back since my first article for CalvinAyre.com, was that China is in serious trouble and Macau would suffer. On July 29th I explicitly called a top in Macau stocks. So far Wynn Macau is down 34% since that date. Sands Chins is down 30%. So is Galaxy.
As I end many of my articles that deal with Macau, I will say again, Macau will keep falling this year as the People’s Bank of China refuses to print the amount of money necessary to keep the bubble inflated.