Hilary Kramer’s purview is continuing to grow over at Investorplace Media — Louis Navellier has been a little quiet on the marketing front, Robert Hsu is long gone, but I’ve been seeing a lot of Hilary Kramer pitches lately. And the recent one that’s caught a lot of attention from Gumshoe readers is for her new service that she calls High Octane Trader.
It’s expensive, at $199 per month, so this is clearly one of those delightful “upgrade” newsletters for folks who aren’t sure they’re getting Kramer’s full dose of wisdom from her Breakout Stocks Under $10 letter (used to be “under $5 … inflation, I guess) or her Game Changers service.
Most of the uber-expensive letters either recommend tiny, less liquid stocks, shorter-term trading and quick alerts, or options trades — all of which are almost impossible to manage once you get over a couple thousand subscribers (and really, options letters with even less than 1,000 subscribers are almost guaranteed to dramatically alter the market for the options trades they recommend).
Some publishers limit the readership of these letters with a hard cap, but most of them seem to just keep the price high and let them be self-limiting in that way — the audience for newsletters that cost between $2,000-$5,000/year is obviously much smaller than those of us who cater to “regular” folks at $20 or $99 or whatever it might be (for what it’s worth, our small group of paid readers are decidedly irregular, but do cough up $49 a year … we don’t have an “upgrade cycle,” when we bring on new folks like Myron Martin to add commentary we suck up the cost of that ourselves and haven’t been charging extra, so there are no fancier premium Stock Gumshoe products available for $5,000, sorry … but we are willing to charge you 100X as much if you’re just feeling generous with your lottery winnings).
But the point is, now Hilary has a “premium” letter — I hadn’t noticed it before, but she says she’s been publishing it for a while now and claims some huge returns of 60-200% over the last two years. All of those claims are trades that were held for only a few days or weeks, and they’re all large cap companies, so clearly these “Lightning-Fast Strikes” (her words) are options trades. She does not say that all of her picks were winners, and many of these big winning picks (like Ebay in April 2012 and Google in July 2011) were clearly options trades that spiked up after excellent earnings reports — those are trades that can easily gain you 100-200% or, of course, lose 100% if you guess wrong on the earnings report and the investor reaction thereto. And yes, making a prediction about what earnings will be and how the stock will react is guessing and gambling, if you get that right 60% of the time I’d say you’re a brilliant trader (or you’re aiming for extremely tiny gains).
Now, though, we’re told that Kramer is “Looking for the Apple or Intel of the Next Century” and she has an “unsung powerhouse” that’s just “scraping the surface.” Here’s some more from the ad:
“Investors are looking for the next big trend. They’re leaving the PC sector in the dust.
“This sentiment was made loud and clear on Thursday, when the tech giants, Google (GOOG), Intel (INTC), and Microsoft (MSFT) all missed in earnings. Intel really disappointed investors when management admitted its PC chip sales sank 7.5% year over year. Since the company has a dominant share of this category – estimates going as high as 88% of all Apple and Windows desktops and laptops – it’s a pretty good sign that the market has shifted beneath the giant’s feet.
“So now the question becomes: Which stocks are going to be the leaders in a post-PC world? One unsung powerhouse is a company I’ll call ‘The Mobile Vanquisher’…
“It’s estimated that 49% of all new mobile devices sold are already powered by its processors. Right now, the stock is navigating choppy waters at 17X trailing earnings, but Wall Street is basking in growth near 24% this year and 10% in 2014.”
That’s not a huge swath of clues for us to work with, but from those hints we would almost certainly have to be talking about about Qualcomm (QCOM). Qualcomm is estimated to have 49% of the application processor market in smartphones with their series of Snapdragon chips, and they are, depending on the estimate you look at, expected to boost earnings by about 24% this year and 10% next year. She also does mention that this is but one of the seven companies she’s trading for the “post-PC era” … but she doesn’t drop even a hint about any of the others, so inquiring mind will have to be satisfied with QCOM for now.
Will Qualcomm be the “New King of the Post-PC Era?” Maybe so, but how that translates into an options play that will generate huge gains over the next few weeks is anyone’s guess. Qualcomm has been enjoying much better growth than Intel (INTC) in recent years thanks to their very strong position in mobile chips, but they’re also more expensive to reflect that performance and that anticipated growth, and there’s plenty of competition about. QCOM does have a decent dividend, paying out better than 2%, and they have now raised that dividend annually for more than a decade (the last bump was a big one, too, a 40% hike in the quarterly payout).
I wouldn’t argue with QCOM as a good play on mobile computing, they’ve certainly done extremely well and have a long history of expertise in mobile chips and the low-power efficiency those chips need to exhibit (that’s what has kept Intel from catching up so far in mobile, a historical obsession with speed and strength in their PC and laptop chips that meant they couldn’t easily translate those designs to the much more battery-sensitive mobile phone and tablet markets). I don’t own Qualcomm, though, because every time I’ve looked at the stock I’ve ended up finding it a bit more expensive than I’d like — I do own Intel because they’re a cheap, dominant player in PCs and servers and the most advanced chipmaker in the world — and I expect Intel to earn their way into the mobile business eventually and pay me a nice, growing 4% dividend while I wait (I also often sell covered calls on my Intel position, though usually only when optimism gets high). But Intel is not going to make me rich, or make me 40% gains in a matter of weeks — will Qualcomm?
Well, I’m not a rapid-fire trader who can trade several times a week or frequently go looking for 25% overnight gains — but I suppose it’s possible. QCOM doesn’t release earnings again until the first week of November, so if you believe QCOM’s next earnings release is going to be a barn burner and they’ll beat or raise their estimates for next year (this year’s been very good, it’s that 9-10% expected earnings growth next year that might cause some hesitation at current valuations) then you could make a bet on the November option contracts. They aren’t actually trading with huge premiums right now, and there is a decent amount of open interest (though not nearly as much as in October and January, when open interest is extremely high at 30-40,000 contracts — “open interest” means the number of options contracts that are in existence, an indication of how much interest there is. Volume is the number of contracts that trade in any given day, it’s more frequently down in the low hundreds so the pricing is always quite volatile).
If you get a near-term options call right you can make a lot of money from a small move in the stock — for those October options, for example, there’s no anticipated catalyst between now and options expiration (other than the new iPhone introduction, I suppose), so the premiums are not large. The $65 call option currently has an ask of $4.70, which with the stock at $69.20 means you only need the stock to rise 1% to have your contract be profitable — a call option gives you the right to buy a stock at a set price before the expiration date, so if you pay $4.70 for the right to buy at $65, your cost per share would be $69.70 if you exercised the option (most people don’t exercise, they just sell the contract to close it at a gain or loss before expiration). Qualcomm common stock moved by more than 1% today, so the price of that option contract jumped from $3.80 yesterday to $4.70 today — a gain of 24% in one day.
If you bump it out to November, for example, to get past the earnings release date, the premiums will be larger (both because you have more time for your story to play out, and because there’s a definitive catalyst in the earnings release that’s likely to move the stock one way or another). You could buy the November $65 call options for about $5.45 today, which would mean you’re essentially betting that the stock will run up either into earnings or after earnings and will get above $70.45 (plus whatever your commissions are). That means that if QCOM does indeed get a pretty solid boost into or after earnings of, say, 4% (not unheard of for a megacap stock, and also, of course, not guaranteed), you’d do really well. A 4% boost from here would put the stock at about $72, so your $65 call option would be worth about $7. You paid $5.45, so that’s a 28% gain before commissions. If the stock takes a 5% haircut over the next two months — which from my uneducated perspective is close to equally likely given the unpredictable nature of near-term events — then the stock would be at $65.75 and you’re facing a loss of about 85% on your option trade. Getting to 44X your money, which is what it takes to turn $5,000 into $225,000, would seem to mean you’re either taking much more dramatic risk, or you’re getting a LOT of these trades right in a row.
I don’t know if Kramer is recommending a specific options trade in Qualcomm, that’s just the kind of trade she boasts of in her marketing material so it’s a reasonable guess. She says she sends several trade alerts a week, so if that’s the kind of options trading you feel like doing then please, by all means, try out her $2,000 newsletter and come right back here and submit a review for us so we know how she’s doing. Be careful in assuming even 20-30% gains each time out, as is implied by the long list of winners in her ad — she doesn’t mention a single losing trade in the teaser pitch, but I’d be shocked if she doesn’t have some … and losing trades on leveraged bets like short-term options can easily lead to 100% losses.
Personally, I would much prefer to play thematic ideas like the long-term trends of the “post-PC era” with long and patient equity positions (on that, QCOM may well end up being a great stock to own — it’s just not at a spectacular price right now) and save my little options trades and catalyst-related speculations for my gambling money … and I couldn’t come close to following three or four trade triggers every week even if I wanted to, but if she can put together good short-term calls with great consistency, well, more power to her. If you’re excited by the prospect of QCOM booming over the coming couple months, let us know with a comment below.