Shadow Stocks

Blog Consolidation Note

David Pinsen — Mon, 12 Apr 2010 21:40:47 +0000

I’m going to consolidate my investment-related and non-investment-related posts on Steam Catapult for now. As I noted in the comment thread of a recent post there (“I’m not as good as I once was”),

I started Shadow Stocks partly because I had negotiated a twofer deal with my logo designer, and partly because I had an idea for monetizing a group investment blog focused on small stocks, an idea that I haven’t gotten around to pursuing. Two blogs is probably one and half blogs too many for me by my lonesome. I have diluted myself a little here.

So, here’s what we’re going to do: I’m going to do all my blogging here on Steam Catapult for now, my investment blogging and non-investment blogging. I’ll keep Shadow Stocks parked for now. I may post my new short ideas on Short Screen’s message boards, but if I do that, I’ll at least link to them from [Steam Catapult]

So, in short: just go to Steam Catapult to read my musings about assorted topics, including investing, as the spirit moves me.

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Out of BPT at $104.69

David Pinsen — Tue, 06 Apr 2010 15:40:12 +0000

A couple of weeks ago I mentioned I bought a few of the $85 strike SEP 10 puts on BP Prudhoe Bay (NYSE: BPT). Sold out of BPT today at $104.69, for a gain of a little over 100% since I bought it in ‘07. Also put in a limit order to buy a few of the $90 strike SEP puts on it, in addition to those $85 strike SEP puts I bought a few weeks ago. Will consider getting back into BPT in the 80s.

BPT versus OIL over the last six months

Bought puts on BPT [caption id="" align="aligncenter" width="512" caption="BPT versus OIL over the last...
Revisiting an Altman Z”-score pairs trade Back in January, on the old blog, I mentioned this...
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Revisiting an Altman Z”-score pairs trade

David Pinsen — Tue, 06 Apr 2010 04:33:40 +0000

Back in January, on the old blog, I mentioned this Altman Z”-score pairs trade:

As of Friday’s close, Short Screen showed an Altman Z”-Score of -0.13 for Trico Marine Services (Nasdaq: TRMA) and an Altman Z”-score of 9 for Oceaneering International (NYSE: OII). Recall that Z”-scores below 1.1 indicate financial distress and risk of bankruptcy, and scores above 2.6 indicate financial strength (scores in between are in the gray zone). Today I shorted TRMA at $5.31 per share and bought an equivalent dollar amount of OII at $64.70 per share.

I had a sell stop limit order on the OII, and when it hit within a couple of weeks, I went ahead and covered the short of TRMA, as I mentioned on the Short Screen message boards at the time. I netted a small gain on the pairs trade (6.5%), but, in hindsight, I would have been a lot better off letting both positions ride. See the graph below.

TRMA versus OII

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Big news in iron and steel

David Pinsen — Wed, 31 Mar 2010 00:33:20 +0000

The FT reports:

The deal by Vale of Brazil and Anglo-Australian BHP Billiton with Japanese and Chinese mills marks the end of the 40-year-old benchmark system of annual contracts and lengthy price negotiations. The industry instead agreed to move to quarterly contracts linked to the nascent iron ore spot market.

“The benchmark system has ended. There is no comeback,” said a senior mining executive directly involved in the talks.

The world’s top ore miners stand to profit hugely in the short term from the new price system. One executive estimated that the profits of the big three producers, Vale, Rio Tinto and BHP Billiton, would be boosted by at least $5bn this year.

Those BHP puts I bought as a quasi-hedge on AYSI should plummet even further now, but maybe it will cost less to reload. I guess that depends in part on to what extent this iron ore news is already priced into the BHP shares.

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A quick note about Nanologix

David Pinsen — Fri, 26 Mar 2010 23:01:58 +0000

5 day chart for NNLX

I contacted the fellow who brought Nanologix (Pink Sheets: NNLX.PK) to my attention initially (Barry B.), asking him if he’d be interested in writing a guest post about it here. My e-mail caught him on vacation in Belize, but he said he’d take as stab at a guest post here when he got back. Barry knows a lot more about this one than me, so, in the meantime, if anyone has any questions about this company, leave them in the comments and I’ll see if I can get Barry to address them in his post.

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Meanwhile, on the other blog…

David Pinsen — Fri, 26 Mar 2010 22:42:23 +0000

On the other blog: 2010 = 1999 + 1982?.

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SPY Update

David Pinsen — Tue, 23 Mar 2010 22:24:44 +0000

In a post last week, I mentioned that the cost of hedging a position in the S&P 500 tracking ETF SPY against a greater-than-20% loss for six months was about 1.3% of the position value. Checking it again today, the cost dropped to about 1.1%. So I went ahead and bought a few of the 96 SEP 10 puts on SPY (SWG100918P00096000) today at $1.34 each. Next month, when Q1 numbers start getting factored in to the Altman screener, I’ll probably buy more puts on individual stocks from that screen and sell any puts set to expire in May.

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