flatlander_60048
10年前
Sorry about the delay getting back to you. I got an unanticipated update to Windows 10 OS that wiped out saved settings. I've reset my passwords so I'm good now. Would have done it sooner but got busy with work.
I would definitely go back to Praha. Sedlick Ossuary (Aka Bone Church -my son's idea) was macabre but interesting. We were in the Old Town area near the square. Had a lot of fun playing people from all over the US and Europe in Foosball. Great way to meet people while trying out the Czech beers (All Pilsner's that I thought tasted very similar).
I prefer your way of traveling (via Euro-rail). Although, we learned that some of the Czech trains outside the City are prone to mechanical problems. We were keeping everyone in the family happy so we hop scotched around to Amsterdam and Norway) via short flights. As it turned out, Hiking the Fjords of Norway was a welcome reprieve from the heat wave Prague was having at the time.
Looks like I'm going to lose about 10% of my SBS holdings since it is trading well above the July 7.50 calls I sold. I'ts a better strategy when the stock share price was not in such a strong upswing. I thought SBS was due for some sideways action after the quick run up from $3.50 to $7.50. But it appears to be making a strong run to $8.
The rain in June has been a welcome surprise since it is early in the dry season. As I have mentioned before, the supplemental supply from River diversion will go on-line next year. So the water supply crisis appears to be over. While I remain long term bullish, I'm anticipating a summer pullback in SBS and the US market, driven by any number of factors (Fed, Political uncertainty, high valuations, etc.).
Regards
FL
flatlander_60048
10年前
Trading a portion makes sense given the roller coaster you have been on with SBS. All of my shares are well in the green. My long term target is in the $30 range in 2019 or so. However, trading around the core makes it easier for me to tolerate the volatility.
Fortunately, water and sanitation tend to be pretty stable and cannot be replaced by other products. Zika probably provides an incentive for SBS to pick up additional users. Storage of water in cisterns can provide a breeding ground for mosquitoes. Expect public officials to push expanding water pipelines so that fewer sources of standing water exist. However, in the short term, this comes with its own problems, in the way of increased construction costs.
The political situation may also be a positive in that they are also going after the VP Micheal Temer. There seems to be a turn in S. America toward centralist regimes. Witness Mauricio Macri efforts to reform Argentina in the last several months since he took office. Venezuala elected a new party tothe majority in congress in January and they are trying to undo many of the destructive policies of the Chavez regime. These political changes could unlock many of the shackles that have held South America Back. The push to impeach Rouseff is coming primarily from pro-business forces in Sao Paulo. 10 years from now we might point to 2016 as a pivotal time in the history of S. America. That said, this area has always had tremendous potential that they have never been able to realize.
I'm betting that SBS will outperform the US market over the next 3 years. The water supply will be much less drought susceptible by next year since the diversion project will help reduce dependence on rainfall alone to refill the reservoirs. Leakage from pipes will be significantly reduced, and tolerance for deadbeat municipalities seems to be over.
Interesting case of Brazil being a cup half full. As I mentioned before, part of my reason for buying SBS is that it is a play on a potential weakening of the US dollar. I Like this approach better than gold since it is based on a commodity necessary to sustain life, rather than one with a value based largely on perceptions.
Have a good weekend.
FL
flatlander_60048
10年前
As you can see today's weakness corresponds to a relative dollar strengthening move.
http://finance.yahoo.com/echarts?s=usdbrl=X#{"showSma":true,"smaColors":"#cc0000,#009999","smaPeriods":"50,50","smaWidths":"1,1","smaGhosting":"0,0","range":"5d","allowChartStacking":true}
I can't fault you at all. Trading around a core position is the only strategy that makes sense in this environment. Growth is scarce and valuations of most equities are up against the ceiling of resistance. Buy and hold does not make sense in this environment.
That said, I'm waiting for a clearer sign that the dollar weakening trend is ending before lightening up on SBS. $/Real still looks to be in the channel that has existed since mid January.
Regards FL
flatlander_60048
10年前
Listner
Be careful attributing too much of SBS' recent share price appreciation to the drought subsiding. While it is an operational tailwind, the share price movement of the ADR (and all of the EEM) is more closely correlated to the weakening dollar. It is no coincidence that SBS's turn-around began in Sept 2015 when the US dollar peaked. Keep your eye on the $-Real relationship. I suspect that SBS is likely to run to $8 by this summer as you have indicated (this would likely be an all time high share price in the low 30's on a Real basis but far from it on the ADRs).
The US election turmoil is a positive in terms of it weakening the dollar. If the Republicans have a brokered convention and change course to an electable fiscal hawk (say Ryan) get out of SBS. Since the dollar will likely strengthen as deficits and debts become part of the general election discussion). Hillary is probably a baseline with continuation of current policies (muddle along scenario). If Sanders strings together more wins and looks like he could challenge Hillary it would bode for a weaker dollar (since he has proposed numerous social programs that would likely increase the deficit), which would be positive for SBS. On the Brazilian front, the impeachment of Dilma with a move to a more centralist government would strengthen the Real and would be positive for SBS.
I know some of this sounds wacko but we are living in a world where relative currency values are driving the macro trends in far flung areas of the world. Emerging markets are especially levered to these factors.
If you are not worried about the short to intermediate term movements (say next 5 years), I still think the long term demographic conditions favor SBS. They are gaining efficiency (plugging leaks, supplementing water supplies with river diversions and negotiating with non-paying municipalities) to improve operations/financial conditions. They have 5% growth pretty much built in due to demographics and expanding the system to new communities. In a world where growth is hard to find this is attractive.
Regards FL
flatlander_60048
10年前
Listner
SBS and the other Brazilian stocks I follow are breaking out today. EWZ up almost 7%. If SBS closes above 6 it will be well above the resistance it has been fighting. The fundamentals are improving - the the Cantierera reservoir is at 55% capacity up from 8% in 2014. The Alto Tiete (sp) has a way to go since it is around 35%. SBS should consider stopping the bonus since I have read that it results in water hording in containers that provide a breeding ground for the Zika carrying mosquito.
As I indicated before, my long term targets (5 years out) out are north of 24. The Bovespa is once again at a critical juncture (see chart and article. The 61 % retracement observed earlier this year brought the Bovespa back to the long term trend that extended back to the mid 1990's. I think it is set to rally. It will probably take a little help (clarity on Dilma's situation, a weaker dollar, a successful Olympics would not hurt either).
Good Luck
https://finance.yahoo.com/echarts?s=%5EBVSP#{"showSma":true,"smaColors":"#cc0000,#009999,#ff00ff","smaPeriods":"50,200,20","smaWidths":"1,1,1","smaGhosting":"0,0,0","range":"5y","allowChartStacking":true}
http://jlfmi.tumblr.com/post/140313476675/brazils-bovespa-is-once-againthe-most
flatlander_60048
11年前
Sometimes I like to look at the price chart on the SBS's website, it allows a better idea of historical performance without the currency minipulation noise seen in the ADRs.
http://quotes2.enfoque.com.br/sabesp/flash/pt/index.asp
As you can see we are still in the channel that extends back to January of 2013. Although, SBS is pushing the upper limits of the channel. It will be important to see it break out or else it could go back down into the 3's again. From what I can find in the way of charts this is the longest downturn that SBS has suffered. The +- 50% decrease (in Reals) has been typical of past downturns. It has been worse when the currency weakness is factored in. If SBS breaks out of the channel, I will quit trading around my core position. I did write some Jan $5 calls which might get taken out. However, I'm limited to less than 15% of my overall position. If I can make 6% every few months it helps even out some of the share price volatility.
Based on the September and early November rains and the El Nino playing out, I'm hopeful that alot of the drought pressure is going to come off the table. As you have indicated, I think SBS is just one of those stocks that you need to maintain a long horizon on.
I have had decent luck in the past with ADRs that seemed to trade at a discount to USA peers. Held a lot of NVS but unloaded about 2/3 of my position earlier this year when it broke $100. I still like their leadership position in Biogenerics but the patent cliff on their branded drugs became too much of an anchor. At least with water and sewerage the threat from competition is remote.
Good Luck
FL
flatlander_60048
11年前
Today was ugly for the Brazilian Real. The currency has now lost 57% of its value since 2014. If we held SBS in local currency this would not be as painful. My original assumption of 3.8 8 was based on the Feb low adjusted for the currency conversion rate which I think was around 3.75 when I made the estimate. It is now over 4. The company fundamentals have not changed appreciably, in fact you can make the case that the fundamental situation has improved (2nd qtr earnings were better than anticipated, tariff increase, el nino drought relief, etc.).
So SBS is totally a bet an the Real/dollar relationship. The deterioration has accelerated and I think we are approaching a climax within the next month. The emerging market weakness extends beyond SBS. Take a look at the EDIV chart.
https://finance.yahoo.com/echarts?s=EDIV+Interactive#{"allowChartStacking":true}
The Business news is quick to attribute the problems to Emerging market fiscal imprudence or china. However, I think there is another explanation that is even more concerning. Perhaps Ron Paul and Stansbery research are correct and there is a bubble in the dollar. Quite possibly, the emerging markets are the most sensitive indicator of this situation. I'm not hoping that the USD has problems, but if this plays out as a rapid devaluation of the dollar then the emerging markets will be long term beneficiaries. The currency weakness will provide an export tailwind when demand picks up, and their is a lot of room for rate cuts which can be implemented to spur economic growth once the stagflation is under control. The situation looks analogous to the US in the Carter years. No one at the time would have anticipated that a 20 yr bull market was right around the corner.
I realize that none of this helps given the losses on our statements. However, I see this emerging market exposure as a hedge against the strong dollar. I will add a little more SBS (probably in the mid 3's given the currency situation). I'll probably use EDIV to fill out my emerging market exposure. I'm planning on making emerging markets about 20% of my portfolio in the next 6 months (maybe sooner).
Hate to say it, but the currency weakness, potential to decrease rates, the demographics and the debt profile (Brazil is about half the US debt/gdp ratio). All these factors make the emerging markets attractive. However, the transition may very well be a rough shake out. I still like the innovation in the US and will continue to selectively add technology on weakness.
Long Diatribe, but the current market reaction to the FED situation has to make one question all assumptions.
Good Luck
FL
flatlander_60048
11年前
The ability to trade around the core and sell calls has definitely made it emotionally easier to tolerate the volatility. The problem is you need to decide what percentage of you holding that you would be willing to sell which can also feel bad when SBS goes on an extended run (which we both believe it will at some point). I usually find that market volatility gives me enough chances to repurchase if I desire to.
SBS has been firming the last couple of days, and almost looks like it is becoming negatively correlated to the S&P (see chart below). Tue&wed last week and today SBS appears to be moving opposite of the SPY. On flat days not much happens. For me, this would be a positive if it persists, since I still have exposure to the US market. However, a week is to short to read too much into it.
http://finance.yahoo.com/echarts?s=SBS#{"range":"5d","allowChartStacking":true}
Regards FL
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