Sunday, December 7, 2008

Earnings Week of 12/08

Time for another installment of the earnings spreadsheet...

Last weeks entry into this series was rather abbreviated because A) I was trying to figure out the html bit for referencing Google Docs in frames, B) it was Thanksgiving weekend and C) pure laziness.

Anyhow, here's a little more explanation: the spreadsheet grew out of an effort to capitalize on options strategies such as strangles/straddles and so on around earnings releases. With so many companies releasing their reports during the height of earnings season, it becomes difficult to cull through all of the information to find companies that might reasonably profitable to play during this release. The various pieces of data - price, share ownership, short interest, close strikes, PE, PEG, etc. - were all considered to be of some importance. The spreadsheet/macro itself actually allows for screening of the stocks for an option activity threshold (based on prior month data from, a minimum share price and the appropriate interest rate to base approximate IV calculations from. Finally, there are some very useful links to charts and sites like and for additional investigation. By eliminating companies with illiquid options and shares with prices below 5, it becomes much easier to find companies that might be worth investigating further.

Caveats: It is very important to keep in mind that this is a snapshot of the data on whatever day I produce it. The spreadsheet does not dynamically update it so whatever day this is posted, this is it. And considering volatility as of late, that could mean a signficant divergence from Sunday when I post these until Wednesday/Thursday which are typically the heaviest days for earnings releases. Finally, the share ownership data (short interest for example) is generally 1-2 weeks old so that should be kept in mind.

Monday: HRB & NSM. HRB has been moderately volatile in the past few quarters and has been in a channel of sorts since early October to the present. The top of this channel looks to be about 20.75 and the 200 DMA is right above that at 21.59. At the moment, I'm skeptical that this could break through those barriers significantly. On the downside, the channel bottom is around 15.50-15.75. Odds would seem to be in favor of some downward movement here. (I don't usually discuss semiconductor companies so NSM will remain unremarked upon.)

Tuesday: AZO, SAI, KR. None of these have been particularly volatile around earnings time in the past quarters. AZO has made a pretty spectacular run from the 87 area on 11/20 to 121.48 on 12/5, closing just above the 200DMA of 120.99. Upside limit here would probably be 129 area (the late Oct high) and the low barrier appears to be around 100 by options expiration. SAI, I know nothing about. As for KR, it seems only interesting from the perspective of seeing if their suppliers have been passing along any falling commodity prices and how this might affect margins.

Wednesday: Nothing made it through filter.

Thursday: CIEN has been volatile in past quarters (with the average absolute move until op-ex being over 25%), but at 6.47 is it really worth bothering? COST is rarely volatile around earnings and any attention paid there should be to see comments on shifting consumer patterns. Then there's LULU. LULU has been a short target of mine for awhile based on it being a specialty store in a period of consumer weakness and an expectation that high multiple stocks would be taken to the woodshed regardless of individual merits. However, the in the last week or so quite a few retailers have jumped on the basis of early reports of sales. (No data on margins, but hey - you can't ask for everything.) Anyhow, LULU has a low share float and high short interest which would normally make this something to investigate but the B/E % moves are a bit high considering history. (+27.9%/-19.37%). There is a reasonable chance of being able to leg into a strangle position with much better prices based on the assumption of continued upward price movement in the first part of the week. Calls on Monday, puts later on Wednesday - maybe around the 13 area if you're lucky. Friday the retail numbers come out so that is worth remembering when playing a specialty retailer like this.

Friday: Nothing.