Another thing about Nintendo is that it is very difficult to find information on insider selling, which, although is usually pre-arranged long before the date of the actual sale, tends to be at very inopportunistic times for the average retail investor. This combined with stop loss orders only exacerbates "down days". My advice is if you really believe in the strong fundamentals of a company, when your stock is tanking (on no real bad news, or more of the same (not enough supply to meet demand), as the past couple months demonstrate), then it is time to average down your cost basis in blocks. Right now, $55 or under I'd buy more Nintendo. But it may be done going down that far because of SSB and upcoming intros into the China and Korean markets. So I I'd wait for the next massive sell-off in Japan which, as most sell-offs go, take down the good stocks along with the bad stocks. Video games are not going away anytime in the near future (1-2 years).
The problem with Nintendo being hard for average Japanese consumers to buy isn't really solved by splitting the stock. The problem is the fact you have to trade it in blocks of 100 in Japan. So the minimum order is something like $48k. Changing that to 1 share minimum makes it a $480ish stock which is much more manageable (a-la Google).
I think, at the very least, if Nintendo would split it's shares, it would make it more liquid for the average investor to purchase and lower their cost basis on commissions as well. Or, they could increase their dividend and or buy back shares when the price dips as much as it has the past month. Put to use all that extra cash they are making, since they don't seem to want to spend any on expanding production. One interesting thing to note is that the little "Ray-Gun" that they sell for the Wii is just a plastic shell that houses the Wii-mote must make a huge profit margin. It sells in the $45-$60 range each and must only cost them about $5 to make.
O/T: BBI is a good buy under $3.00 a share right now. Carl Icahn recently disclosed he and his investment fund recently upped their holdings in the company. Merrill Lynch also recently disclosed a sizable holding in Blockbuster as well. The stock has been beaten down for a long time and if you watch how the price behaves on the really bad market days, there is a floor built into the price. I believe the brand name recognition alone is worth $3.00 a share, the assets are gravy. It looks like it's being groomed for a sale or merger, or maybe debt restructuring at a cheaper price with the soon to be even lower interest rates. If you have the cajones and enough to buy thousands of shares it's good for a $300-$500 a day based on $0.08-$0.10 moves in the price.
Good luck to all!
The relatively high price per share of Nintendo's stock in Japan (vs. the ADRs in the U.S.) makes it less liquid. Average Japanese retail investors tend to be less speculative than U.S. investors.
And, I read somewhere recently that a major institutional investor just unloaded a bunch of Nintendo stock, probably to cover some other position elsewhere... and maybe SNE has a huge short position in Nintendo, to try and save face.
Penhead also mentioned the institutional seller, and your other points make sense. The price of the stock on the TSE does seem like it would favor institutional investors and discourage smaller traders. I imagine the purpose is to reduce volatility and provide a steadier price. Of course, on those occasions when an institution needs to buy or sell quickly it can result in a big drop (or spike).
If that's what's happened I suspect (or hope at least) the past two days indicates that factor may be behind us. At least until the next big fund or investor gets hit by the economy and the need to quickly pull their investment overrides the luxury of doing it slowly and with minimum price effect.
Of course, I sure wouldn't object if such an institutional investor chose to BUY a big ol' wad of 7974 all at once!
Nope, not one little bit!
I like the idea of shorting by competitors, too, even if it IS a little far-fetched.
It IS far-fetched, isn't it?
I mean, of course Japanese securities regs are different from the SEC, but COULD Sony or some other competitor actually get away with doing that? Am I naive to believe that's not a common tactic here as well? If not overtly, then in ways that are difficult to trace back? Considering that one could easily do that with borrowed money (say, from mortgage-backed loans, for example?) that would REALLY open up a can of good ol' Campbell's Worldwide Worms, wouldn't it?
Not terribly serious about the above; just speculatin'. But you certainly gave us some things to think about!
'"I don't have a problem with the valuation of the company itself."
Sure you do, otherwise you wouldn't ask why NTDOY is still trading up.
" Or even that the current stock price is lower than I think it ought to be. My concern is why are there more people willing to sell this stock at decreasing prices than people willing to pay more to buy it?"
Other than the institutional selling you don't know.
Why is NE with its definitive growth trading with a PEG of 0.41, ESV with a 0.47 PEG??? Why does AAPL trade with a 27 PE while its competitors Dell, HP and softie trade with a 16 PE. . .?
Why ask questions that have a speculative answer, then ask for validation? What's the point?
The banks who sponsor NTDOY don't let retail investors short sell it. 7974.os might be shorted for a few days worth of trading. If you compare the TSE chart to Nintendo's you see the Nintendo is just more volatile than the general market. Remember a lot of shares traded when the stock was half or a quarter of where it is now, so those shares still yield a good profit to the seller. Also Nintendo does not play the press the way that Sony or Softie does and that limits retail interest (as well as the unsponsored shares being licked on the pink sheets forever.) Here is a link to the quarterly financial data: http://investing.businessweek.com/businessweek/research/stocks/financials/financials.asp?symbol=7974.OS&dataset=incomeStatement&period=Q¤cy=US%20Dollar
<Your cost basis of $65.00 is fine, leave it to bad luck or bad timing. The fundamentals of the stock are sound>
Agreed. I don't have a problem with the valuation of the company itself. Or even that the current stock price is lower than I think it ought to be. My concern is why are there more people willing to sell this stock at decreasing prices than people willing to pay more to buy it?
A single institutional seller doesn't answer that. Institutions (like any other large investor) spread their sales out over time in order to keep from happening exactly what we see happening. It would be a pretty inept fund manager indeed who drove the price of a stock she was selling down 17% in a month. Of course it could be argued that the INTENTION is to do that, in order to buy even more at a lower price. But that is (1) unnecessary; (2) way too risky for an institutional investor; and (3) normally done by shorting the stock, not by selling already-owned shares. By the way, do you know what the short interest is on NTDOY? That might offer a better insight into the price behavior.
"So why would share owners who (really) believe the price will soon rise sell their shares for less than what they cost a month ago? I want to know, Pen, because even though YOU aren't doing that, SOMEONE sure is. "
As in the last post. . .a large instutional seller exited their position in NTDOY. Documented by an analyst making the same statement regarding the drop. It doesn't matter if they did it because they needed to offset a loss, reduce exposre to retail, tech or whatever. . .they and likly those they advise sold.
My not recommending to buy at 65-75 was because the technicals of the stock were over extended, not to mention the entire US market. Run a chart on the past year and or two years. I hadn't recommended the stock from about 50-75 missing a chunk of the run up.
I would have bought more under 55 had I been able to. My position is full and my portfolio is diversified. I'm holding until earnings start to level off. A dip in the road is all this is. . .a buying opportunity.
Your cost basis of $65.00 is fine, leave it to bad luck or bad timing. The fundamentals of the stock are sound.
<I never said it wasn't extended at $70.00. I like it at $55.00>
<I've got a long term position and don't trade it>
"Do you really think it will ever see $70 again?"
<I bought at $33.00 and would recommended buying below $55.00>
Well, I certainly don't blame you for feeling good about that. But I find it hard to believe that you really expect this stock to reach $70 again, at least not in the near future. If you did, why would you not be buying this stock right now in the mid-fifties? Especially given that the analyst's predictions are for the low nineties (okay, maybe high eighties - see, Tam, I'm TRYING to learn). And the analyst I'm quoting isn't Yahoo!'s; I mean J.P. Morgan Chase -- the depositary for Nintendo ADR. I doubt if they see a $70 price as "extended". Even the $65 I gave as an extreme example would look like a bargain purchase at $90+.
And, more to my point, if those who CLAIM to believe this stock's value is going up (that would include you and presumably most people here) were just holding their shares (as you say you're doing), then what has been happening SHOULDN'T BE HAPPENING.
I'm sure there are many things about investing that my understanding lacks, but what little I DO know tells me that the reason a stock's price goes UP is that a DEMAND EXISTS for the stock and people WANT TO BUY shares, while owners, like yourself, are happy with their holdings and aren't trading them. That causes the prospective buyers to offer more and more in order to entice you to sell.
And it works, too! As the price being offered goes up, more and more owners agree to sell at the ever-increasing bid. This is how a stock's price goes from $30 to $70 a share.
IT IS NOT how stock goes from $70 to $30. In order to do that, you need to have MORE people WANTING TO SELL than to BUY.
Now, if the situation were simply that there was little interest in buying them, the price would simply remain at $70 where it was (although the trading volume would plummet, of course).
So why would share owners who (really) believe the price will soon rise sell their shares for less than what they cost a month ago? I want to know, Pen, because even though YOU aren't doing that, SOMEONE sure is.
In fact, a LOT of "someones" are doing that. Otherwise the price for a company that's breaking sales, marketshare, and profit records nearly every week wouldn't be falling almost as fast as its revenue is rising!
(Yes, I know it just jumped 3% today - now it's only 17% that it's lost in the past month)
Tam and Pen, thanks for your answers.
Tambourine_Man... <This comment shows your lack of understanding:>
You're correct about that. That's why I posed the question in the first place. And I've heard often about how the prices are affected by monetary exchange rates. Well, it's certainly true that exchange rate hedging, arbitage, the "carry trade", and all that is well out of my level of experience. And I don't even want to go NEAR anything called Four-X!! (sorry, that was a sheep shot; couldn't help it). But nothing that I've read or heard offers an acceptible explanation for how that seems to affect Nintendo's pricing far and away beyond that of OTHER JAPANESE COMPANIES doing business in the U.S.
And although I appreciate the attempt, I'm afraid yours really doesn't help either.
The 334 yen difference in your example would be an 11% drop, not 15%. And you calculated that on the $249 U.S. retail price, which is set by the U.S. distribution network and fluctuations in the exchange rate are already factored in. That price is not the WHOLESALE price that Nintendo gets, though. Their revenue from U.S. sales diminishes only as the units they were already committed to are delivered. NEW SALES (which is what we're concerned with as investors) prices will simply include higher USD wholesale prices. Let the retailer deal with it as she may. Or perhaps Nintendo's U.S. distribution contracts don't allow for such adjustments; that might explain why the U.S. is so low on their list for deliveries and product introductions at the moment. When the dollar begins to stabilize at a higher rate, there will be plenty of DSs and Wiis available.
And the exchange rate difference is really more a "cost of production/distribution" issue. Variations in the price of oil or aluminum among Nintendo's vendors probably impacts their costs as much or more.
In any event, even the amount mentioned would only apply to the portion of Nintendo's worldwide sales that are made to UNITED STATES retailers. The U.S. market accounts for about 30% of Nintendo's worldwide production of the DS, and probably a similar proportion of Wii, so you'll need to lop a bit over two thirds off the total losses you can attribute to the USD/Yen situation.
And if that weren't already enough, remember that an even larger portion of their revenue is paid for in Euros (which trade higher than the Yen), which would offset (or maybe even eliminate) the U.S. difference.