Twitter-based Investment Decisions

http://www.businessinsider.com/new-hedge-fund-uses-twitter-to-pick-stocks-2010-12

Summary: A new hedge fund will be using 'sentiment analysis' of Twitter, a real-time social networking communication tool, to predict changes in the stock market. By using software that they have developed, they say that they have already been able to successfully predict profitable trades.

It's very interesting that someone is finally using Twitter to make financial decisions. As technologies like Twitter allow for faster and faster communication, they become more useful in financial decision-making. This is because changes in public mood are made public (to those with the ability to analyze it) faster than the effect of those changes on the market.

I'd like to know how long changes in twitter-temperament take to become reflected in market prices, as well as if these predictions have only been valuable for specific sectors of the market (I would predict consumer technology as the most accurately predicted sector, as a result of the type of people who I think use Twitter). It would also be cool to see what other chartable data the Twitter-mood can be correlated to.

Transocean (RIG)

Transocean LTD (RIG) is a Switzerland based oil drilling company. They owned the oil rig that exploded in the Gulf of Mexico under the control of British Petroleum (BP). Unfortunately for Transocean, the explosion caused a plague of bad publicity and hefty legal fees. These costs have been present on the company’s financial statements causing total profit margin to decrease severally. With a cease in offshore oil drilling in the Gulf of Mexico, a few of Transocean’s rigs were no longer in operation. This essentially affected total revenue. Taking a further look into the company, one can see, despite the disaster, they are still an industry leader. Pre-explosion, Transocean was steadily valued at $90/per stock range, after news of the oil spill, stocks plunged to $41.88 in June. Since the company hit rock bottom, stock prices have risen steadily towards the pre-disaster stock price. I believe the trend will continue and even possibly surpass the company’s previous price highs. Several factors that will lead to the continued growth of this company are as follows; as legal matters with the BP disaster wind down, the company can focus more on business operations with fewer distractions. This has already begun to occur; the company has purchased new rigs that boast technological advancements in safety and ease of drilling. The Rig cost $195 million and is scheduled to finish construction in one year. With future expectations of greater total revenue, increased oil drilling demand, and increased profit margin, this company is quite attractive for our team, Yo Investments. Although there can be a further hit on the stock in the short-run, I believe that the company can hit towards same price (pre-explosion) in the long-run. The graph above illustrates this company is on the right track.

Dell negoiating

http://www.marketwatch.com/story/dell-negotiating-possible-compellent-deal-2010-12-09

In this article it talks about how Dell is trying the emerge with Compellent. But they are negotiating a deal so in a way they can make a profit. This is because Dell is making money but in different departments of dell. So in my opinion i think dell should emerge because for the pass couple of months dell has been in a decline phase but since compellent is a big company they will make a big profit. As well, Wells Fargo is trying to emerge with them too.

China surplus

http://www.marketwatch.com/story/china-november-trade-surplus-narrows-to-229-bln-2010-12-09

I found this article very interesting. This is because we all know that china is one of the biggest country that is very wealth and is advanced in many ways. The monthly trade surplus stood at $22.9 billion, shrinking from $27.1 billion in October, although it was higher than the $22.3 billion surplus expected by Dow Jones Newswires survey of economists. So China surplus has been shrink very much.

A Chinese Goldmine for Investors

http://www.dailyfinance.com/story/investing/china-youku-ipo-stock-soars/19753829/

Youku is the Chinese "youtube" and recently decided to go public. Youku is probably the most popular video site in China, and still has huge prospects for growth. A more innovative site like Youku is predicted to rapidly grow, as China "catches up to the times". Because it has been public for just 2 days, specific figures are still hard to determine. Though from the specifics that can be determined, Youku is looking like a goldmine for investors. Revenues are high, clocking in at a whopping $35.1 Million in their last nine months, and are planning to reach 50 million for the year. They have reported, 203 million different monthly visitors to their site. Obviously as a company, this is impressive. This isn't a value stock, shares will be trading at over 70 times revenues, which is high, but it is a very impressive growth company. The IPO was originally $12.80, and quickly rose to $25.57 on its first day. After day one it was at just about $32 dollars, and now just hit $42.50. This growth is outrageous, almost never seen before.

So the more "macro" question is, was this growth due to the location of the company (china), and if so, will foreign companies grow at a faster rate then their American counterparts.

I personally love this site, and recommend it for watching tv shows, so when I heard it was going public I was interested. We saw it at the $26 and were going to invest, but as you may know, the trading site is down. (Which really stinks!) As was brought up in the seminar, when a stock has doubled, it is probably time to pull out. It would be rough to maintain such a steep growth, if any, so we will probably no longer invest.

GM Stock

This Thursday (11/18/2010) GM returns to the market. After emerging from a government-organized bankruptcy (16 months ago), trying to improve their finances, and venturing into new products (like electric cars) GM feels like it is ready to once again be on top. According to the article, GM execs are trying to play up their bright spots, including: "a better lineup of cars and trucks, potential for global growth and a new cost structure that enables the company to make money even when the economy dips." However, the company has not fully "healed." The government is still heavily involved. In fact, the stock offering will only reduce the government's stake in GM from 61 percent to 43 percent. It can take years before the government has completely left GM. As the article says, "For shareholders, that means GM may not always put investors first. Political priorities may trump their demands. Some worry GM will spend too much time and use too many resources working on small cars or electric cars and not enough on profitable vehicle lines like trucks and SUVs." Plus, GM has made it known that it does not have full control over its finances. Its accounting procedures aren't where they should be. For instance, GM has included $30.2 billion in goodwill as an asset. Goodwill is an intangible asset and is not something that could be sold. It is also larger than other GM assets, like property ($18.1 billion) and cash ($26.8 billion).

With all of these issues (plus some more if you read both articles), logically GM does not seem like a good buy. However, logic doesn't always win out when it comes to the market. Plus, foreign investors seem very interested in GM. Chinese automaker SAIC, GM's partner in China, is finalizing plans to buy about a 1 percent stake. Also, funds which manage the finances of royal families and some nations, could invest $1 billion in GM. Overall, there seems to be quite a bit of risk in investing, but who knows, this might be something everyone overlooks, and then it just explodes (it has happened before). So, what are your thoughts; is GM something to take a careful look at or stay away from?

Sources:

http://www.chicagotribune.com/news/local/wire/chi-ap-us-gmipo-redflags,0,6379264.story?page=1

http://www.google.com/hostednews/ap/article/ALeqM5h3slmxJfh-ehG_A3Nf2276IQ0zzw?docId=acefdb2929504ccea71b2f692baff461

Seasonal Trading

With Holiday season kicking in, my partners and I decided to diversify our holdings. It was pretty evident that a colder time period (fall/winter) will drive coffee sales up. Though the idea started off with a simple hot chocolate at Caribou Coffee, I bought Caribou/Starbucks stock almost immediately after. The idea turned out to be a good one. Caribou Coffee has been going nowhere but up, and we sold Starbucks after making a slight profit. We are now looking to diversify to sub sectors for the Holiday sales. I personally, am looking into investing into big retailers that generally have a big impact on sales and have a positive outlook for the 2010 winter.

One stock we have had trouble with was VF Corporation, or as we nicknamed it 'The North Face Stock'. It had been in a downward spiral since we bought, assuming it would go up as the cold approached.

Do you have any ideas for stocks that will generally do better in the winter? It could be coffee, winter clothing, toy manufacturer/sellers, etc.