Friday, July 15, 2011

Right Or Wrong, I Like It Long...


Today, it was ascertained: I am living proof that fools rush in where angels fear to tread!

... MS broke yesterday's low, which means I overpaid, but that shouldn't be anything new. MS reached a daily low of $20.79. I did have solid, credible reasons for getting into MS. It's been on my watch list for over a year and last year, I traded it quite frequently with some degree of success compared to my other trading adventures.

So here are the reasons I decided to get so into MS, crystallised by the following chart and analysis:

1. I had a choice between 9 Figure Man's initials' stock (not his actual company, just his initials) and MS and although 9FMI's stock had a lot more cash than debt, MS had a much better risk:reward ratio.
2. Options expiry tomorrow... I thought the July puts below $21 were basically useless, although open interest to sell at $20 was strong. I further looked at August options chains, which showed support for pricing at $21 and above.
3. Beautiful balance sheet on MS shows great upwards price potential with tonnes of room for market cap growth. I used JPM as potential market cap resistance gauge for second-tier stocks in the sector. In a risk-on environment, second-tier financial sector stocks should follow the same market cap valuation ratios.
4. Finally, biggest, hugest reason I chose MS: potential acquisition target. With so much cash on the balance sheet and such a low market cap, MS could and should become an acquisition target! Theoretically, successfully acquiring MS at today's market cap means that the company doing the acquiring effectively gains $220 billion in cash net debt based on Yahoo Finance statistics.
5. C earnings announcement pointed to potential for bullish followthrough, but instead led to disappointing price action




Report Card for the Day:

-0.24% SBA (finally a respectable account once again after placing MS here)
0.0% Roth IRA

Happy Shiny Weekend to all...



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