Bombed Out Stocks Watch List
  • Hi FSF Community,

    I'd like to start a watch list of potentially interesting names that have been recently hammered in the markets for whatever reason (earnings miss, management leaving, competition, etc) and why they might be buys.

    Screening for such names that have made huge downward moves have turned up gems in the past e.g. Netflix.

    The name of the day is Lululemon (LULU). CEO is leaving at 51 years old to spend more time w/ family as LULU embarks on international expansion. Stock is down 17% to around $68 and is trading at around 28X earnings.

    LULU is super popular here in San Francisco and on the West Coast. I'm curious how it's perceived on the East Coast and the rest of the world. Huge margins, but lots of competition. They haven't moved into men's wear much yet, or internationally.

  • I'll add AGNC to this list, one I'm watching and got in at not quite the bottom. It dropped to as low as $24.01 today putting the dividend yield at 21%.

    The company got hammered after a bad 1st quarter earnings report and is down $9.00 since then. What are the odds of two bad quarters in a row, for a historically solid company, is my bet.

    Risks are 10-year rates continuing to rise making existing loans worth less for the company, a big dividend cut announcement, as well as 2nd quarter not panning out. I see this as being a solid dividend player at a discount assuming treasury rates don't skyrocket.

    They should be announcing their dividend this week (or early next) if history is any indication.
  • @JeremyNoelJohnson Holly shitake! You are right about that 21% dividend yield Jeremy! Any idea whether they will cut the dividend yield? See if you can find any history where they cut their payout. This is the biggest dividend I've ever seen!
  • @FinancialSamurai They cut it once on March 2012 to $1.25 from $1.40, but the stock price continued to go up. Before that it was 10 quarters of $1.40. Before that, the company was new and just getting off the ground for 4 quarters.

    The question I ask is the recent selling of the market correct in that the dividend will get brutally slashed, or is it all fear based off a bad first quarter and the stock will head back up. If the dividend gets cut big and 2nd quarter is bad, then my gamble will not pay off. If, however, those are good, then I think I'll bank 5% + on the trade to my total stock portfolio for the year.

    I think the dividend will be $1.00 or more for the announcement. Blue sky is $1.25.
  • "LULU is super popular here in San Francisco and on the West Coast. I'm curious how it's perceived on the East Coast and the rest of the world. Huge margins, but lots of competition. They haven't moved into men's wear much yet, or internationally."

    I would say it's not popular in the Chicagoland area. I had never even heard about it until recently. Maybe because I'm a guy.
  • I'm about mReits and Hybrid REITs at these prices. I think the QE3 ending scare has priced everything well below book (even after potential book markdowns).

    Check out AGNC, TWO, NLY, O, DLR
  • @thecollegeinvestor - It certainly seems like the mReits are really low right now. Now I'm kicking myself for buying AGNC too soon, even though I got in what I thought was low. Time will tell if I make up the difference :)
  • These mREITS like AGNC and NLY sure look enticing I've got to admit. I'm assuming the market is baking in a massive cut in dividends.

    Given I think the spike in bond yields is over short term, I assume I should be a better buyer. And if the 10 year falls back to 2% or below, all is good again and these stocks spike 10%+. Could be a very good trade.

    I've got about 35% of my punt portfolio in cash after deploying about 30% into wretched Apple and more Chinese internet stocks on Tuesday. 5% or 10% position in mREITS? What do you guys think?
  • @FinancialSamurai - I think a 5% or 10% position in some of the mREITS is a worthy bet. As the price of AGNC is even lower today, I'm kicking myself for not being more patient and waiting for a lower price. However, everything is like that in hind sight :) It will be interesting to see how it plays out.
  • Remember, right now it's a game of how good these managers are at hedging potential book value losses. The dividend will be there - short term rates are low, while longer terms rates rise equals profit for REITs. It's just how badly will their longer term bond holdings lose value that is dictating the share price?
  • @thecollegeinvestor Sounds good. We won't know the losses until the results.

    Right now, cash really is king due to volatility in both stocks and bonds. This is what I've been waiting for, for way too long as I was early in taking profits this year.
  • @FinancialSamurai

    Wait, so your article today said to NOT invest in these dividend yielding stocks in our rising interest rates environment, which we are in, especially in terms of real estate related companies...but here you are enticed by AGNC and NLY and you are thinking about taking a 5% to 10% position? Why the change of heart? Or what did you ultimately decide to do?
  • @KTR - There is a price for everything. Tactical trade, just waiting for when. I mentioned this in my article.

    "Of course there are always tactical opportunities in oversold situations. If interest rates ease off a bit, all these REITs that are getting blow to bits will have a nice bounce."

    Please share with us your stock picks.
  • About LULU, that's that overpriced yoga wear, right? Hmm... I'm on the West Coast too, (Orange County, CA) and yeah it's big out here as well amongst the yoga/pilates crowd from what I hear, especially since yoga/pilates continues to be a "thing" for women around here. I can't say that I see women wearing them as street clothes very much because, erm, they are mostly skin tight sweat wicking workout wear that render you practically naked and are inappropriate to wear outside of a yoga/pilates environment. I'm just not part of that crowd and my family/husband/inner circle dress very conservatively so I just haven't had any exposure to it. IMHO overpriced yoga/pilates wear is a fad...I'm not a fashion insider so I can't say it will last but most fads don't...

  • @FinancialSamurai
    So you are going to do it, just waiting for when? I've been looking at AGNC and NLY so that's why I've been asking around about it. I'm just getting conflicting opinions...those who are saying AGNC is a falling knife and has already been on the downside before this interest rates going up thing and based on where things are going stay away, and then there are those who are saying that those mREIT's are are set up so that they profit from rising interest rates so you will see a sharp drop initially and then they will go back up after, if I remember correctly Q4. Based upon what I understand, AGNC and NLY still hold my interest, but I shouldn't make any moves on them until I've identified an upside that is supported by other information. Right now they are dropping and who knows how much farther they have to fall, and IF they will come back up so getting in now would be too risky. Am I right in my understanding of it all?
  • @FinancialSamurai
    I don't have any stock picks yet. I'm a newb and I'm here to learn. I'm sure I will have more to contribute as I raise by investing IQ but like I said before I've only started to scratch the surface like, a week ago, when I found your blog! I recently hit an income level and have socked away enough money to start investing and I feel that I have a lot to learn from you and this community before I make any moves, so for now you will see me asking more questions than anything else. Hopefully I can at least be of value in that I can get discussions going? I apologize in advance if I can't provide more than that for now.
  • @KTR I think there's no way to know for sure, just opinions and gathering as much data as we can about AGNC, NLY, and other stocks. My gamble is that by end of year I can make 5% or more from dividends and break even on stock price, however, I could be wrong and lose as much. It's a "swing of the bat" as they say.
  • Another fun thing for the last half hour of trading today will be listening to an AGNC presentation at a Morgan Stanley conference and see how the price reacts to this, especially if the dividend is announced at it. Conference starts in 7 minutes.
  • @KTR check out investopedia's stock simulator. I've used it for many years and still use it from time to time when testing out new strategies. It gives you a sense for the market without risking your $$$$$ Its a good learning tool.

    As for the others, which brokerage firm do you use. TD Ameritrade for me.
  • @KTR Today is a day where stocks and bonds are getting hit and cash is king. I'm sitting on the sidelines for now waiting to see some signs of a floor. Everything seems dicey now.
  • @FinancialSamurai, I couldn't agree more. I've pulled back for now until I can get a feel for where things are going. Everything seems a bit chaotic. I've received quite a bit of criticism as expected.
  • Thanks, Sam, Junior, and Jeremy!

    @JeremyNoelJohnson AHHH I am work right now and I can't watch right now...fill me (us) in when it's over please!

    @Junior thanks for the suggestion! Interesting that you suggest the simulator and brokerage firms because I was actually researching brokerage firms and wanted to go with OptionsXpress or OptionsHouse because of their virtual trading features so I could give it go before playing with my real money. Although I like the fee structure of OptionsHouse I think the interface is not as user friendly to a beginner, so I might just go with OptionsXpress, but then again neither of them have access to International Stocks which I am interested in getting into, although I'm not sure how much of it I really will be doing. I too would be interested in hearing what firms everyone else uses and pros and cons.

    @Financial Samurai, I'm getting the same sense right now as well based on what I am understanding so far. With interest rates going up and with the market generally doing what it's doing without any support from fundamentals, everyone is saying a correction is coming as well so I'm feeling like I've arrived a bit too late to the party. I understand that one way to balance out any feelings of a coming correction if you already have a lot of exposure to the S&P is to do a synthetic short on SPDR S&P ETF, and I've noticed a lot of hedge funds have done just that. Thoughts?

    As for my stock picks I have quite a few on my list that I am still researching and I promise I will post them once I fully develop my investment thesis. There are a few I am currently working on. Unfortunately looking for a bottomed stock currently is not one of them.

  • @KTR I was fortunate to be at my desk during the presentation - in a nutshell, they are hedging their bets to better be able to handle a more volatile market and rising interest rates. Their portfolio is a little smaller and I suspect there will be a dividend cut to $1.00 'ish based on what I heard.

    I first heard of mREITS when I was high dividend stock hunting a couple years ago and even after a couple years, I'm still trying to better understand how they earn their money. Part of me wonders if my pre-emptive purchase of AGNC will turn into more "tuition" as I learn to invest and feel the sting of a bad decision. Or I may get lucky :)
  • @JeremyNoelJohnson Thanks for the update! I'm definitely keeping my eyes on those mREIT's as we go into the next two quarters!

    Oh and oops I feel silly for saying that looking for a bottomed out stock is not currently something I'm researching. Of course it is! Just not seeing any at the moment because we don't know if it's bottomed out until we start seeing that upside. LOL.

    That being said, I currently have MM on my watch list that I'd like to add to this discussion. Mobile ad company, post IPO from last year, recently hit a 52 week low ($16.86-$5.87) after disappointing 4th quarter results. It is now at $8.14 so, it is looking like it is back on the upside. First quarter fins met expectations. Analysts forecasting high growth and to be slightly profitable this year...what do you guys think...potential multi-bagger? I am intrigued!

  • Gold is really starting to look attractive again. Pundits can't decide whether Gold is going to $1,200/oz or $2,000/oz!

    Fed meeting this week. I bet they say reassuring, measured words, which will be good for bonds and stocks. But Gold is a total enigma as currencies strength.

    Watching GLD and GDX.
  • Gold is being held down right now, at least until all the big shorts are covered. SLV is far more interesting in terms of commodities. If I am just holding either to bet against the market, seems easier to just hold a comparable short position on the sp500. If you are holding to prepare for the end, physical > paper promises. Spot prices are insane right now though.
  • AGNC just declared $1.05 dividend and after hours trading is at $25.99.
  • Oracle is fairly beaten down today/this week. Might be a decent time to pick some up
  • RenRen (RENN) finally below $3 again.
  • Apple is below $400 again. Not sure if it will test that $385 low again, but it might be a good time to keep a closer eye on it if you've been waiting for a drop.
  • @Jay Picked some Apples at $398.6 today for a trade. Man things are ugly. So many people leaving Apple to do something else!
  • RENN at 2.76 :P
  • Picked some AAPL on Friday for $396.0 - appears to have been the right time for an upswing.
  • @JeremyNoelJohnson Now you can tell yourself, "Why work, when you can make easy money in the markets?" :)
  • @FinancialSamurai Don't I wish! I started off the year good and then made some mistakes. Now I'm back on track and close to break even (if I were to sell now). But I like the long-term prospects of both RENN and AAPL.
  • Anybody watching $LINE - talk about taking a beating. The question I ask is will this be an Enron and go to 0 (it is under investigation by the SEC), or will it be able to recover from its nose dive?
  • I just checked the $LINE ticker and thought of this thread. I don't see how it could go to zero, but I don't know if it's going back to +$30. I'm not sure, but given they have real assets, wouldn't worse case be a dividend cut?
  • @straightflush - Buying $LINE at $20.50 would have been a very bold and lucrative move several days ago as it then spiked back up to $27.50 shortly thereafter. I chickened out though :)

    I think a dividend cut might happen, however, the only real reason the stock price dropped I think is because of the SEC investigation.
  • Any who own $EBIX stock, you'll want to take a look, it has nose dived 25% today. There is a report of money laundering going on (don't know if it is legit), but something is amiss.

    Edit: EBIX just posted a response saying the allegations of money laundering are false. Interesting. What a chart to look at for today:
  • Ah! I wish I would have checked this post sooner. Could have gotten in there at around $8.75 or $9.00. Would have been a quick $2.00 gain. Thanks for the info.
  • Let's keep the momentum going with stock picks. :) I've been following ZNGA and SIRI and have been riding the waves with ZNGA for most of the year until they announced that they are no longer targeting RMG (real money gambling). I've been hanging onto SIRI since mid-April with some success, but I don't see it going much higher than it already is.

    Neither of them are bombed out by any means, but I figured I would pass along some info. What have you guys been watching?
  • European ETFs :)

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