Friday, February 21, 2014

"Frozenomics" Bah! - PMI Report Saves The Day

Just when stocks started to correct and investors were becoming despondent over the bad economic picture, a strong PMI report was released yesterday morning and rescued the bulls. Prior to the release of the PMI report, just about every bit of economic evidence, from employment statistics through housing starts, had shown that the economy was slowing down. The bulls blamed the poor evidence on the snow. Now there is at least one piece of evidence that there is a real economic recovery going on. The S&P 500 immediately reversed back up - circled on chart below - and the rally began.

In my view one good economic report is not enough to change things, but it won at least the day for the bulls.  However, the larger battle at S&P 500 is still unresolved.  Options expiration played a part in yesterday's market and will continue to do so today. So I am just winging it until the overall situation is resolved. Of course the situation may never be resolved as we wait for Godot to rescue us.

Here are a couple of chart set ups:

PXD has been struggling this year but is still knocking on the breakout door. They have had some setbacks in terms of getting things going, but there is no doubt that the resources are in the ground and they will get there. Perhaps the $190.00 level is options related.

Note how PXD and EOG have traded in lockstep  until 2014 began - circled on overlay chart below. EOG is PXD's little twin brother and has begun to head back up while PXD has lagged. Is this just a short term situation or is something larger in play? I think that things will work out for PXD and my price alert is set at the top of the base around $191.40

MONIF may be in play, especially in light of yesterday's purchase of What's App by FB.  Here are the facts:

1 - The company has a unique mobile banking platform. They just reported 67% year over year growth in revenues and similar growth in customers.  Here is a nice British website with lots of discussions and information on MONIL

Note the strong revenue growth. Revenues are obviously much higher today:

Income Statement30 Jun '1330 Jun '1230 Jun '1130 Jun '1030 Jun '09

2 - MONIF is not profitable because it has spent a huge amount of money in R&D plus buying other companies. The losses are relatively large, but the company still has lots of cash. Amazon analogy anyone?

3 - Big chunks of  MONIF are owned by Visa, and large institutional investors like Leon Cooperman (10%). Plus they are tied to IBM in a big partnership deal.

4 - There is a very strong case being made in the world financial community that someone is going to gobble up MONIF for an astronomical premium.  There is a land rush going on right now for companies to grab a piece of the yet defined mobile pie. Look at this tweet by Reid Hoffman yesterday. If anyone has his finger on the pulse he does.

@reidhoffman 15h
“Mobile in the ‘pre-pagerank’ phase” by Pre-page rank - lots of interesting options, incl. social rank

5 - MONIF started to run yesterday after the market digested its earnings report and Doug Kass made some over the top bullish comments. I bought back a chunk at $1.16. If it crosses $1.24 it should run to the old highs or more. I have traded the swings in MONIF since last years lows when Leon Cooperman made his famous statement that MONIF is the one stock he would hold for 5 years with enough confidence to forget about.

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.
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