Long Rimage Corporation (RIMG) With Short S&P Hedge

By Shiraz Lakhi – Original Article Posted 06/12 Seeking Alpha – Holding Long Rimage Corporation (RIMG) Dollar-Neutral Hedged By Short S&P Index ETF (SPY)

Currently holding a long position in Rimage Corporation (RIMG) on strong cash flow reserve. The business maintains a significant cash flow which can be distributed via dividends or re-invested in acquisitions, research & development, or transitioning into cloud technology based data-transfer. Basic ‘strong fundamental’ argument to the upside (read the full article by clicking below image) is founded on an extraordinary 64% free-cash-flow-yield. The long position in RIMG is fully hedged via a dollar-neutral long stock/short S&P pair trade, in anticipation of RIMG outperforming the S&P…

Rimage Corporation, a technology company operating within the computer peripherals industry, generates a current free-cash-flow of $12.07 million (based on trailing 12 month data), with an enterprise-value of $18.58 million. The free-cash-flow-yield (FCF/EV) is hence 64.9%. Additional positives in favor of RIMG include zero long & short term debt, 5 year average ROE exceeding 10%, a book-to-market (based on historical cost) of 0.94, and a bullish analyst mean target of $17 per share – by Shiraz Lakhi.

 

Long Northrop Grumman (NOC) With Short S&P Hedge

Original Article Posted 06/12 Seeking Alpha By Shiraz Lakhi – Northrop Grumman (NOC) Offers Strong Upside Potential Based On Robust Free Cash Flow Yield

I am currently long Northrop Grumman (NOC), dollar-neutral hedged by the S&P 500 index ETF (SPY), in anticipation of NOC outperforming SPY over the next 3-4 weeks. Northrop Grumman Corporation, a conglomerate operating within the aerospace and defence technology industry, generates a current free-cash-flow of $2.08 billion (based on trailing 12 month data), with an enterprise-value of $19.55 billion. The free-cash-flow-yield (FCF/EV) is therefore a solid 10.6% (implying undervalue based on yield), which offers deep value relative to peers within the same industry. Additional data in favor of NOC include a low PEG ratio of 1.21, a price/sales ratio of 0.57, institutional favored ownership exceeding 90%, and low book-to-market of 0.65 – by Shiraz Lakhi.

Long Cisco Systems (CSCO) With Short S&P Hedge

New Trade Idea – Long Cisco Systems (CSCO) Hedged With Short S&P Index Pair Trade In Anticipation Of CSCO Outperforming The S&P 500 Index – Alert Published 06/12 Shiraz Lakhi

I am currently long Cisco Systems (symbol: CSCO), based on strong fundamental argument to the upside (click on article below, to view analysis). The long position in CSCO IS fully hedged via dollar-neutral long CSCO/short SPY pair trade strategy, in anticipation of CSCO outperforming the S&P 500 index.

Cisco Systems, a tech company operating within the networking and communication devices industry, generates a current free-cash-flow of $9.25 billion (based on trailing 12 month data), with an enterprise-value of $58.1 billion. The free-cash-flow-yield (FCF/EV) is therefore 15.9%, offering strong upside. Additional positives in favor of CSCO include a book-to-market (based on historical cost) of 0.55, a low (relative to industry) price/cash ratio of 1.96, and a low debt/equity ratio of 0.81 – by Shiraz Lakhi.

Long TAM S.A (TAM) With Short S&P Hedge

Brazilian TAM S.A (TAM) Offers Solid Upside On Robust Free Cash Flow Yield – Currently Holding A Long Position In TAM With S&P Hedge – Original Idea Posted 06/12 Seeking Alpha By Shiraz Lakhi

With a 22.9% free-cash-flow-yield cushion, TAM offers strong upside, despite the current downturn in the airline industry. Operating within the major airlines industry (Brazil), TAM generates a current free-cash-flow of $462.8 million (based on trailing 12 month data), with an enterprise-value of $2.02 billion. The free-cash-flow-yield (FCF/EV) is hence a strongly bullish 22.9%. Additional metrics in favor of TAM include a low price/cash ratio of 2.98, return on equity (ROE) of 47.87% (based on trailing 12 month data), a low price/sales ratio of 0.48 (consensus bullish), and a low (relative to industry) debt/equity ratio of 4.28. I am long TAM, with a dollar-neutral hedged short position in the S&P index ETF (symbol: SPY), in anticipation of TAM outperforming the S&P – by Shiraz Lakhi.

Long Computer Sciences (CSC) With Short S&P Hedge

Computer Sciences Corporation (CSC) Vs S&P 500 Index (SPY) Offers Opportunity For Market-Neutral Hedged Pair Trade – Original Alert Posted 06/12 Seeking Alpha By Shiraz Lakhi

I am currently long Computer Sciences Corporation (CSC) with a dollar-neutral short S&P (SPY) hedge, wagering on CSC outperforming SPY over the next 4-6 weeks. Computer Sciences operates within the information technology services industry, and currently generates a free-cash-flow of $1.01 Billion (based on trailing 12 month data), against an enterprise-value of $6.61 Billion. The free-cash-flow-yield (FCF/EV) is a healthy 15.3%, offering significant upside potential. Additional data in favor of CSC include a low PEG ratio of 0.91, low price/book of 0.76, a book-to-market of 1.32, and analyst mean target of $43.85 per share – by Shiraz Lakhi.

TeleNav (TNAV) Moving Higher On Strong Volume

TeleNav (TNAV) Continues To Gain Upward Momentum On Strong Volume, Despite The Broader Market Downturn (Original Alert Issued 06/14) – By Shiraz Lakhi.

Following my recent article published on Seeking Alpha, shares in TeleNav (TNAV) have been moving higher, currently trading at $16.57/share, originally (at time of publication) at $14.43, up 14.8% in 9 days.

There is justification for this. The company still has plenty of upside, as the current free-cash-flow-yield, upon which the initial analysis was founded, remains at around 25%. Additional positive fundamental metrics in favor of TNAV include a price-to-earnings-growth ratio of 1.34, zero debts on the balance sheet, over $210m in cash (on balance sheet), year-on-year sales growth over the last five years. Even if the sales drop, the most supportive metric in favor of the business remains the cash-flow-to-enterprise-value.

The stock is moving higher on consistently strong volume, despite the overall market downturn. I am long TNAV (fully hedged by short SPY).

Wishing you every success in your investments. And good spirit…

Shiraz Lakhi – Independent Investor/Entrepreneur

The Long Stock/Short S&P Pair Trade

How To Minimize ‘Directional’ Risk, By Entering ‘Long’ The Undervalued Stock, And Simultaneously  ‘Shorting’ The S&P 500 Index – By Shiraz Lakhi.

There are two ways of trading stocks – either ‘single-directional’ (long-only, or short-only) speculative positions, which anticipates a selected stock moving in a particular direction along with the rest of the market, or a ‘comparative’ position, which anticipates a selected stock ‘outperforming’ the general market as whole (such as the S&P 500 index).  The latter, provides an advanced, market-neutral method of trading, which wagers on the stock doing ‘better’ than the S&P index, irrespective of whether the particular stock moves up, down, or sideways…

For the investor who wants to advance beyond the conventional, single-directional speculative (‘long-only’ or ‘short only’ positions) trade, and more critically, protect his/her position against the broader market directional risk (corrections, crashes, prolonged negativity), the long stock/short S&P pair trade provides resolve. The strategy involves taking a ‘long’ position in a stock the trader believes will increase in value, while taking a simultaneous ‘short’ position in the the S&P 500 index ETF (symbol: SPY)…

More popularly coined pairs trading, this particular strategy (entering long the stock and shorting the S&P) wagers on the stock ‘outperforming’ the S&P index. Put simply, the investor is not concerned about whether the selected stock will move up or down, but how it will do ‘relative’ to the overall market (S&P). By entering a long position in stock X (preferably one which exhibits robust fundamentals, such as a high free-cash-flow yield, amongst additional undervalue metrics) and simultaneously entering a short position in the S&P index, in exactly the same dollar value (in other words, if you enter long $30,000 XYZ stock, you would short $30,000 SPY), investors can establish a ‘dollar-neutral’ market-hedged position.

Effectively, no matter which way the overall market moves, whether it corrects, crashes or rallies, direction is of no relevance. In a pairs trade, the single point of focus is purely whether stock X will outperform the S&P. If both the stock and the S&P fall, as long as the stock declines less (in percentage terms) than the S&P, the trade results in a profit. If both the stock and the S&P rise, as long as the stock rallies more than the S&P, the trade results in a profit. Only if the stock ‘underperforms’ relative to the S&P does the trade result in a loss. The objective is, over time, the fundamentally superior stock will tend to outperform the market (S&P index).

Wishing you every success in your trading… and good spirit…

Shiraz Lakhi – Independent Investor/Entrepreneur