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Outerwall Inc. Message Board

  • wwtimewarp2000 wwtimewarp2000 May 13, 2010 12:48 PM Flag

    Be Careful CSTR Friends

    Let me preface this to save you the time of bashing me. Go look at my old CSTR posts. I have been extremely bullish on CSTR and have owned it since $26/27 with a $75 price target by 2011. Search for a post titled "the pros will miss this one" if you don't believe me. Now for the bad news.

    The technicals here are screaming overbought. The MFI has been over 80 for 8 days. The stochastics have been over 80 for 6 days. That doesn't mean the euphoria can't continue; but if you're thinking of starting a long position, I would not be doing it right here. If you have to, please, first figure out how much you want to own - then buy 25% of that position now. Then add another 25% and the remaining 50% at lower levels. Pick price points say $2-3 lower than your initial buy. Make your price points even closer than that if you want. This way, you're happy if it goes up and you're even happier if it goes down.

    If you're sitting on a 100% gain or close to, think about taking 1/2 of your position off the table. Don't get greedy. You can then wait to put that money back to work at a lower price and own even more shares. By selling 1/2 of your position on a 100% gain, you can't lose. Now you're playing with the house's money. And if it keeps going up from here, you still own it and can root for the rally to continue still without feeling bad for selling some of it out. No one got hurt taking a profit.

    I know it's tough to think this way, esp since this stock has been flying even in the face of Thursday's market selloff. Re-train your thinking and make even more money trading this stock.

    On a fundamental basis, the stock is still fairly valued. It was previously undervalued relative to its expected growth and its peers (think NFLX). Now that the company is putting the growth doubters to rest, the stock has been playing catchup to the relative value of its peers. Some will try to argue against this valuation. Do the comparison yourself and you'll find that CSTR still has a PEG ratio close to 1.0. NFLX still trades at a premium. Maybe it deserves to, but CSTR was long overdue to catch up. The long-term theme is still in play here. But don't get greedy with it. Only reason I'm sharing this - I've been doing this a long time and have made this stupid mistakes many times over. But I've learned from it. If I can save one person from repeating my stupid mistakes, then great.

    GLTA and Go CSTR!

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    • Well said Timewarp. Your previous post about "the pros will miss this one" was one of the best post I ever read. You called it. Keep posting, appreciate the insight.


      • 2 Replies to stockscapital
      • Thanks. I won't always get it right but am certainly happy when I do. If you've never done so, pick up the book 'The Intelligent Investor' by Ben Graham. He describes how stocks get under- and over-valued by Mr Market all the time. Some will tell you that this can't be done anymore because program traders are too fast to realize these opportunities. But you see, only half of the battle is identifying those 'under-valued' opportunities. The other half is predicting which of those 'under-valued' stocks are rightfully under-valued by Mr Market, and which will get re-valued more appropriately once the company starts proving its expected fundamentals are coming to fruition. When you find the latter, buyers come in at some point and are now willing to pay more for those fundamentals. That's how it goes on the Wall Street fashion show. Ideas are all around you in your everyday life.

        You won't always get it right. Some companies have great ideas yet the stock never goes with it due to poor company management. Like KKD - Krispy Kreme Donuts. Man, I loved those things and still do. But they expanded too fast in the face of a better-health movement and ran the company into the ground.

      • Good philosophy on any investment. Have been in and out of CSTR. totally agree with you we are in new grounds. Out of the other side of my mouth sold NFLX $100.60 with a huge gain. there is a classic example of holding on to some I sold all of mine.

    • Google is going to SLAM NFLX and CSTR with Youtube! Probably get an anouncement tonight at GOOG shareholder meeting about some new way to stream video content on Youtube...

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