Post Game – $FCEL Comes Up Roses

Now that’s more like it. Today was a much better directional day for those looking to trade momentum as the market didn’t have much of a reaction to the Senate’s approval of military action in Syria. The S&P 500 traded higher roughly 1% before moving sideways for most of the afternoon. The stock encountered some volatility as news trickled out from Washington that the Senate Foreign Relations Panel had approved the use of force by a slim 10-7 vote. Still, the full Senate and House of Representatives need to sign off on the plan before action can be taken, and those prospects were dealt a significant blow as some lawmakers voiced their disdain (including John McCain, though he is pushing for a more widespread campaign in the Middle East that will undoubtedly be meet with heavy resistance). The markets digested this news at the end of the day and still managed to close relatively close to the highs.

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We received a healthy amount of broad market and company specific news today, including the most recent edition of the Fed’s “Beige Book,” which is more aptly described as the state of affairs in the US economy. The most recent report showed moderate growth from most districts spanning July and August, boosted by stronger housing and car sales activity. This data was reinforced by solid August auto sales reports from both General Motors $GM and Ford $F. Samsung was the focal point of the lunch hour as the Korean tech giant introduced its Galaxy Note III phablet, a refreshed Galaxy Note 10.1 tablet and the all-new Samsung Gear Smart Watch. While the Smart Watch boasts some interesting features and could be a compelling device in conjunction with a Samsung smartphone, none of the devices felt particularly revolutionary, with most new features in the phablet and tablet feeling incremental at best. Apple $AAPL shareholders did not appear too concerned regarding the new product lineup, as the stock hung tough in a range between $498 and $500 for most of the day. LinkedIn $LNKD made additional news after hours as the price of its equity offering came in at $233 per share, which caused an additional sell-off in to that level after the market closed. $LNKD could be an interesting reversal candidate after the large move down in the last couple of days, and we may explore initiating a position here in the next few days, though external events have prevented us from having much conviction in new positions in recent days.

In terms of our portfolio, we made a conservative short in the $SPY in the middle of the day, with half of our position in weekly $165 puts coming off the books for an 11.4% gain. We don’t feel terribly comfortable having the other half of the position on overnight, but we get the feeling this market is on somewhat unsteady footing, and any new headlines pointing towards accelerated action in Syria could trigger a selloff. We wouldn’t discount the prospect of increased tapering talk either, as the Beige Book report suggests that it could be coming sooner rather than later as the broader economy appears to be making decent progress. We are of the belief that Ben Bernanke will want to initiate tapering before his time as Fed Chairman is up to prove that the economy is in a position to stand up on its own, and in our view it is time for that Fed to get out of the market’s way.

The big news in our portfolio today comes from one of our largest positions, FuelCell Energy $FCEL. The firm released its quarterly earnings after the bell that showed monstrous top-line growth of 81% year-over-year to a record $53.7 million. Gross margins came in at a record of 8.4%, though operating expenses remained on an upward trajectory. The company’s EPS was in line with estimates at -$0.03. The company also surprised investors by announcing a marketing agreement with NRG Energy that will boost FuelCell’s exposure and could aid cost savings. NRG will market the technology to its customers via either a PPA in which NRG would purchase the fuel cell power plants from $FCEL, or NRG could purchase the plants and sell electricity to the grid. This agreement should dramatically increase $FCEL’s exposure while providing avenues for larger projects down the road. Our stock and option positions in $FCEL should see a nice boost as the stock has been on the move after hours.

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Overall, a good day for Viking Trader. We’ll be back with more in the morning, but for now, hope everyone enjoys their evening.

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Posted on September 4, 2013, in Uncategorized and tagged , , , , , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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