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Trading Natural Gas

Price of natural gas has been on a run lately. There are a few factors causing this run. First, the inventory level was the lowest in 5 years span. We had a hotter than usual summer which lead to higher usage of natural gas. Moreover,  scientists stated that we are expecting a colder winter this year, which means higher use of natural gas for electricity and heating is expected. Natural gas is going to be volatile in short term. Volatility offers traders profitable opportunities when execute trades properly. DGAZ and UGAZ are 3 times leveraged ETNs which track the price movement of natural gas. DGAZ is the short position whereas UGAZ is long. We recommend for day trades only with these two tickers as volatility brings higher than normal amount of risks. When the price of natural gas is on an uptrend movement, scalping UGAZ is not a bad option. On the other hand, we see an easier scalping opportunity in DGAZ when the price is on a downtrend. We don’t recommend to hold them for the long term. Short term swing or day trades are preferable. Please don’t use naked option sells on these tickers. It’s very risky as your accounts could be wiped out overnight due to volatility. Trade accordingly.

P.S. We day trade these two tickers on volatility. No positions as we are writing this post.

Happy Investing!

Alibaba Group Holding Ltd.ADR (BABA)

Alibaba is one of the biggest companies in China. It specializes in e-commerce, retail, fin-tech and AI. Jack Ma, the executive chairman, has recently announced that he is going to step down from current position in September 2019. Current CEO Yong Zhang will take over his position. Mr. Zhang has been with Alibaba for over 10 years. We believe he is a fully capable leader. There is no need for panic. It is going to be business as usual. Recently, Alibaba has increase its present in emerging markets such as India and Malaysia. It also form a strategic partnership with Russia. We should see strong revenue growth from these regions in next few years.

BABA is currently trading at $158.80/share as of today. It is close to the 52 weeks low mark of $152/share. The China-U.S. trade war concern definitely causes uncertainties in the market near term. We could see a trade talk resuming after the mid-term election. Short term traders should use a wait and see approach as the volatility is still high at the moment. However, we see more upsides in the long run. Alibaba has a strong balance sheet. Its forward P/E is at 20.72 which is a good range. Operating cash flow is in a healthy incline. Free cash flow has been consistently positive for the last 5 years. Sales to cash flow ratio is positive as well. We are bullish in the long run. Our price target is at $200/share by 2020.

P.S. we have a long position in BABA

Happy investing!

Dividend Play

Are you working a full time job right now? You have extra cash sitting in your bank account and you have no idea what to do with them. Moreover, you would not have time to manage your investment as well. To be honest, in today’s low rate, there’s not going to be any added value to your money in the bank. Some could even argue that the money would depreciate over time due to inflation. A lot of working labor tend to distribute part of salaries into some kind of retirement saving plans. This is one way to invest your spare cash.

Today, we’d like to introduce you another option you could consider to use your salary on. It is to invest in dividend growth stocks. What’s a dividend stock? Some companies reward their shareholders by distributing dividend( money ) back to them. Depends on the number of shares that you have, you would receive an amount of money accordingly.  For example, you have 1000 shares of ABC company. The company decides to pay $.50 per share as dividend payment quarterly. As a result, you would receive $(1000*.50 = $500) every three months. Most of companies distribute dividend quarterly. However, there are tons of companies that are paying dividend back to their shareholders, not all of them are worth to be invested in. We would recommend to put your focus on companies that are fundamentally and financially stable with growth potential. You can think about like, ” does this company perform well historically?” ” Do I see them running still in 50 years?”. ” do they have a consistent dividend payments history?” It’s safer to invest in companies that you know you don’t need to worry about chance of bankruptcy and things of that nature in foreseeable future. Dividend investing could provide you with a consistent stream of cash flow. At first, you may not see a massive return of your investment right away. However, we are looking at the big picture which is long term growth. You could reinvest your dividend payments back to the company. The compounding effect would vastly increase your wealth in 15, 20 years. Some tips to select company(personal opinion):

P/E ratio not too high nor too low (5 to 35 is a good range)

Dividend Yield: 2.5 to 10

Do not put a lump sum investment in at once. (Try average in over time)

Share price would fluctuate ( stay true to your strategic theme)

Be patient

Moreover, you may see some companies pay dividend monthly. Please beware that these companies may carry higher risk because they may use debt to pay out dividend. And their growth potential could be limited. We could talk about how to evaluate a company in future post.

In conclusion, dividend investing is one of the options you could choose to invest in. It’s not the only option. After all, it’s your own hard earn money. Don’t just listen to other people’s opinion. Please do your due diligence.

P.S. We have positions in MMM. KMB is on our watch list.

Happy investing!

PayPal Holding, Inc. (PYPL)

As the technology advancing further, we are getting closer to become a cashless society. Digital wallet and mobile payment are going to be essentials in the global market.  Paypal is one of the most used digital payment services in the world. It has active users of 237M and growing. In 2017, China’s Baidu has entered a partnership agreement with PayPal to allows its users to purchase overseas merchants. It helps Paypal to set its foot into one of the largest emerging market which is dominated by Alipay and Wechat. The adoption rate is a lot higher in emerging market such as : China and India, comparing to developed countries. We are seeing a huge growth potential in this field. PYPL is currently trading at $74/share. It has a forward P/E at 26.86 which is a healthy range. (Data was provided by Thomson Reuters.) ROE is at 11.69%.  In 2017, net income vs free cash flow is a healthy: 1.8B/1.86B. Moreover, it reported the latest earnings last week. Revenue grew to $3.69B up 24% year over year.It beat company’s top line forecast. EPS also beat the consensus: 0.45 vs 0.41. Venmo, the company’s social platform, continues to gain popularity among millennial. Although it is only operating in the states, we strongly believe that it will be open to other regions later on. We are still seeing huge potentials with the company. Our price target is at $90 by the end of 2019.

P.S. We have a long position

A revisit to Myomo Inc. (Ticker: MYO)

We have briefly talked about this new IPO before. It is a medical robotic company.  It has released Q4 earnings and Full year financial data of 2017 three days ago. Total revenue for the Q4 of 2017 increased 22% in compared with Q4 of 2016. For the full year 2017 total revenue increased 41%. Gross margin decreased to 68% from 74% year over year. We believe it is due to its expansion and increase of revenue cost respectively. It did a secondary offering in the end of November to raise capital for company’s expansion stage. R&D expenses increased 56% year over year. Q4 EPS is (0.25) which is a huge improvement compared to Q4 of 2016 EPS (1.25). Cash on hand at December 31,2017 was $12,959,000.

There are a few other things we like about this company:

  • No debt
  • Europe and Canada Markets approvals
  • Only of its kind in the market
  • Awaiting medicare paycode and Asia market approvals

Here are things that you should consider before making your investment: this company has move from controlled launch phase to commercial scale up which means increased demand of capital is expected in the near future. Because all the expansion and marketing are going to require additional amount of funds. We expect that there is going to be some sort of offering in the future. They do have warrants that they can exercise for additional funds. As a result, there is a certain level of dilution is expected. It may sounds bad to current shareholders. However, this is a normal activity to growing company such as MYO. We are bullish on MYO in the long term. For short term investors or day traders, you can expect the similar share price pattern in the upcoming a couple of quarters, which the SP would likely to goes up before next earnings and it would experience certain level of sell off post earnings as well. We could see a slight drop of current price in the near future.

P.S. we have adjusted our position post Q4 ER. We are a long in MYO.

One Stop System Inc (OSS)

This is a new IPO. It started trading on NASDAQ Capital Market on Feb.1. OSS is a provider of high performance computer appliance to various industrial applications such as: data center, financial network and deep learning etc. Its IPO price was $5. It is trading around $4.75-$4.99 range lately. It has an outstanding shares of around 12.34M. Its public float is around 7.57M. We like its product lineup which is going to be in demand for years to come. However we won’t be able to do an in depth  fundamental analysis yet since there aren’t too many financial data we could find  as it is a still relatively new public company. Here is the S-1 SEC filing (contains 2016 and partial 2017 financial data) we could view:

http://secfilings.nasdaq.com/filingFrameset.asp?FilingID=12433422&RcvdDate=12/18/2017&CoName=ONE%20STOP%20SYSTEMS%20INC&FormType=S-1&View=html

We started a position recently and plan to hold through its first ER. We will likely adjust our position accordingly after they report the first earnings. We will revisit and do a more in-depth fundamental analysis after.

Happy Investing!

 

 

Myomo Inc.

Myomo Inc.(MYO) is a medical robotics company which develops neuro-robotic technology. It’s based on patented technology developed at MIT and Harvard Medical School. Currently it has a MyoPro product line of myoelectric limb orthosis which help restore functions in the paralyzed or weakened arms and hands of individuals. It is a relatively new IPO. It went public in June, 2017. It is not exactly a great return on investment kind of stock so far. MYO is still trading a tad below its IPO price at the moment. One of the reasons that drove the share price lower last year, MYO did a secondary offering to shore up its balance sheet. As a result it diluted the stock value of shareholders back in November. However we still see growth potentials in this company as it is in the introduction stage. Its product is the only kind in the market. It has open Canada and EU markets recently. It has performed well so far into 2018. We have seen an impressive 40% increases in price YTD. It is not a bad entry point now as it is heading into its earnings (estimated date: Feb 12). We estimate it beats earnings on Q4, 2017. Before you decide to enter please also consider the risk of volatility in the price because MYO is a low float stock( its price could drop sharply if it fail to beat the earnings). Our price target is $7 in short term (within 6 months).

For your reference,

The link is its last 10-Q filing: http://otp.investis.com/clients/us/myomo_inc/SEC/sec-show.aspx?FilingId=12368574&Cik=0001369290&Type=PDF&hasPdf=1

P.S. We have a long position in this company. High volatility is expected in this equity, please invest with caution.

Blockchain Hype

Cryptocurrency exploded in 2017. It is one of the hottest topic among investors. There are more than 10 different cryptocurrencies you could invest in. There are going to be more cryptocurrencies in the future. Blockchain technology is the core of cryptocurrency. That is where some of the so called “blockchain” companies come in. Because of this blockchain hype, we saw some micro-cap stocks exploded in the final two months of 2017. Their share prices jumped to all time high of the year. These are some of tickers: MARA, DPW, RIOT, LFIN,LTEA,TEUM etc. The blockchain hype has become kind of ridiculous. For example, there was this Long Island Iced Tea Corp. changed its name to Long Blockchain Corp. last month. Its share price was instantly up over 200% in the same day. Moreover, there is a small cap finance company called Longfin. Its IPO price was $5, its share price soared to over 2000% after the news of acquiring a small blockchain company broke two days later. Most of these companies are not profitable. Also, they have very low public float which leads to extreme volatility in their stocks prices.  As a result, there were a lot of people trying to chase the hype and invest into these companies, ended up losing a lot of money. There is no doubt that some early birds made huge gains on their crypto investments. There might potentially be more opportunities in the field of digital currency as technology advancing further. As of now,  we still look at cryptocurrency as a very risky investment. If you really want to give it a try, we recommend to trade with caution and do not hold it overnight because most of these stocks are related to price of bitcoin, and bitcoin runs 24/7. Holding overnight could have risk due to decline from bitcoin’s price. After all, please do your own DD before any investments.

P.S. We will keep an eye on future development and revisit this technology at a later date. Have a great 2018 and happy investing!!

Technique 2

We talked about how to trade around a core position in last post. Today we’ll discuss about another technique called scalping. This technique is very effective when trade with volatile stocks. Because of the volatile nature of the stock, it comes with high risk as well. It is not recommended to beginner traders. First, you will need to find a low float stock which is trading with high volume. Generally, stocks with 20M or lower tradable shares are considered as low float. Here is the formula you can calculate the public float: Outstanding shares – restricted shares = public float. Secondly, after you pick out 1 or 2 stocks you are going scalping, you would need to see its pricing patterns. You should always try to buy in when the price is in decline pattern.Don’t worry if you were not able to get in at the lowest cost possible, 9 out of 10 the stock price would rebound to certain level. Once the price rebounds, we suggest to sell it  within 50 cents range. Because of the volatile nature, the price is very unstable. That’s why you would need to discipline yourself not to be greedy otherwise you may lose all gains in a blink of your eyes. Sell for small profit and come back in again when the price is on the decline pattern. Sometimes you could repeat the buy, sell, buy, sell, actions a couple more time within the same day if the volume and catalyst are there. Sure looks like a small profit, it does add up over time. Hope this could help you with your future investing.

P.S. This technique is suitable for experienced day traders. However, it is still a very risky technique. Please use it with caution. Happy investing!

Technique 1

I found this technique quite useful. I’ve been using it in some of my investments as well. First, you will need to find a company which you believe it has growth potential and you are willing to invest in for the long run. How to find that specific company? Do a fundamental analysis on the company and try to determine if the company’s share is fair value. (There will be a separate post on how to do fundamental analysis in the near term). Let’s say you did your due diligence and came to a conclusion that you are going to invest in this company. You would buy 100 shares at first. Then you purchase another 2 blocks of 50 shares over the next month or two. Now you have 200 shares in total. Because you are planning to keep this company in your portfolio for the long term, you could keep 100 shares  as your core position which means you will not sell those 100 shares in the near future. Stock price is never a straight line. There is always ups and downs. Now you have 200-100 = 100 shares left for you to trade around your core position. Some time later, if the share price goes up  to say 6%(any target price you have), then you may sell 25(any number you would like to sell) shares and profit in. If it goes up again, you could sell another 25 shares. After you sell all 100 shares, you  will have to wait for the price to come down. Once the price is close to the fair value that you estimated, you could buy back in again. Don’t purchase 100 shares at once. Try to break it down to blocks of 25 or 50. Don’t worry if you estimation is incorrect, you could always average down by buying shares lower than previous purchase. Please remember you still have your core position(100 shares) after all these trades. This might appear to be small income but over time the profits add up. In conclusion, it is a repetition of selling it when price goes up, and buy back when price drops.

P.S. While you are waiting for the price to drop, you still need to do your homework and keep up to date with your investment. Good news may trigger a pop whereas bad news could lead to a drop. Hope this could help, happy investing:)