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Electronic Arts Inc. (ERTS) Message Board

  • flyerd1 flyerd1 Nov 19, 2007 12:49 PM Flag

    Recession/Weak consumer issue + Recap of "Reality"

    Here's something the shorts seem to keep failing to understand: "No matter what" people will forgo other things iot have the newest, coolest electronics. In other words, even the poorest people will continue to buy video games, ipods, flat panel TV's etc because it makes them "feel better" and wealthier. They will even cut back on food spending. Don't believe me? My Father-in-law works for the census bureau and is always telling me (without specific names or addresses of course)about going into peoples homes to interview them and seeing that they are very poor and seem to be "just getting by" on food stamps, unemployment, etc. But you know what? They have a new 52+" plasma TV with a PS3 or X-box360 or Wii hooked up to it and are playing new games as their source of entertainment. Maybe it's just as much a vice as smoking, drinking, etc and maybe it's a terrible example of the state of our priorities as a society... but it's "reality".

    PERSPECTIVE on insider selling at gme:
    http://messages.finance.yahoo.com/Business_%26_Finance/Investments/Stocks_%28A_to_Z%29/Stocks_G/threadview?bn=24951&tid=15766&mid=15766

    Here's more food for thought "with" nice charts to go along with it:

    The 1st chart gives a nice look at overall console sales. It shows that over the past yr xbox has more than dbld it's base, ps3 has almost 6X it's base, and wii has almost 14X it's base now. More consoles = more game sales for "all" VG makers. This is also extremely good for gme:

    http://vgchartz.com/hwcomps.php?cons1=Wii®1=All&cons2=PS3®2=All&cons3=X360®3=All&start=39033&end=39397&weekly=1

    http://vgchartz.com/amonthly.php?month=10&year=2007&console=&maker=&boxartz=1

    http://vgchartz.com/aweekly.php

    http://vgchartz.com/eweekly.php

    Industry talk:
    "Overall, the NPD analyst commented of the October results: "This year's sales have already achieved the annual sales number for 2005 - and the two biggest months are yet to come. I think we'll see not only record-breaking revenues but record-breaking year-over-year growth when the final numbers are tallied."
    http://www.gamasutra.com/php-bin/news_index.php?story=16270

    "U.S. sales of video game hardware and software jumped 73 percent in October."
    http://www.reuters.com/article/marketsNews/idUKN1534211420071116?rpc=44

    http://www.thestreet.com/_yahoo/newsanalysis/techsoftware/10390458.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

    IGN article:
    http://wii.ign.com/articles/835/835706p1.html
    -----------------------------------------------------------
    It's definitely "all BAD" for VG companies; I can HARDLY STAND TO WATCH......

    GITA!!!

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    • 2% is shares, 100% is leveraged, there are 4 major states of a market: combos of trending/non-trending with volatile/non-volatile, I trade several different systems depending, trend following is a long term system that I talk about with you because you are always talking 18months, you want to step into a low win system and leverage in a high win, very rarely do I lose more than anticipated because 90% of my effort is anticipating how much I will lose, I enjoy being confusing on purpose transparent is so boring, I have about 10 more months of live testing my most recent system that is strictly qqqq and if all goes well I will never trade anything else. merry christmas.

    • I'm not sure where the win 100%/lose 100% comes from. You mentioned gaining 2% or losing 4% and you also talked about a different trade irt gaining/losing of 100% of a 20% investment of capital. I know you used to say that the majority of your trades lost money but now you're talking about an 80/20% success rates so you seem to be a little all over the place irt explaining what you're doing. Gap refers to when you set your downside exit price (to limit your loss) and the stock trades through that price causing you to lose more than anticipated. It's hard to know which combination you're working from; have you given up on trend trading?

      ttwo sounds like my csco option play ($1 per $1 gains) but I thought you didn't really do a lot of options. Apparently you're saying you bought some ttwo calls for $1. Nice, how long till they expire? Mine expire in Jan(09'). I have some nice RIO and GLW 09's too.

      GITA!!!

    • The return depends on when you get the losses and 4% is 2n against. Gaps? I'm talking about the q. Plus you have short term taxes but:

      try the math on this... 20 trades, 80% success. On success you win 100% on loss you lose 100%. How much would you trade? Lets say you use 20% of your account per trade. How much would you have after a year... min, max, and average. These are my type of targets.... that and stupid fun like 100% per $1 ttwo moves.

      ps this is very opposite from a trend following system... just an interesting pattern that came to me one day. its momentum scalping the q. so far it works as expected.

    • "my method is plain old math for example I have a qqqq system that has 80% chance of 1n (~2%) return 15 to 20 times a year backtested for 10 years. Without leverage thats 20% - 30%."

      --> I use plain old math too (peg, p/e, eps, etc). I'm just able to apply the math to a fwd prediction and you say that you're not able to do that. I see what you're saying but look more closely at the math behind what you just said: "80% chance of 1n (~2%) return 15 to 20 times a year" indicates a success of x= 9-16 out of those 15-20 times. That means 3-4 losses of at least 6-8% (assuming a closing transaction to limit the loss before a gap against it of greater than 2%). The summation of that is a 14-22% return. You should be able to do at least that good by just diversifying into stocks with good fundamentals and not worrying about the ups & downs along the way. Hakuna Matata!!! (Swahili)

      I guess both trains get to their destination at approximately the same time because neither one seems to do much better than the other. Except maybe this year because I'm having a stellar one in the VG sector (erts,atvi,gme,thqi). I only had thqi for the past 6wks but a few limit fills at $24 brought my avg price under $25 so I'm up approx 20% in just those 6wks. My return was also juiced to the upside with those "Free money" puts I sold. Most of my put sales were in atvi, gme, erts, and thqi (sweeeet...). Good returns from some tech, oil, and Ag sectors helped as well. Good returns from some tech, oil, and Ag sectors helped as well. Next yr should be another great one in the video game sector and some of those tech/oil stocks but I also expect some nice returns from the positions (stock/options) I recently started to accumulate the financials. I expect then to be up nicely over the next 1-2 yrs. I'll be looking at homebuilder's next yr too (both long calls and short puts).

      GL in 08' & Merry Christmas!!!

      GITA!!!

      P.S. Re: <"Can you imagine trading say 10M with your 'system'? All those words won't help you sleep at night but you should be fine in say 18months.">

      --> Yes I can. I'd still be able to use my "system" (averaging into stocks 100K at a time).

      --> I never have trouble sleeping so I just can't relate to you there.

      --> ERTS is down to only 6 months now. Hey, why don't we start a financials countdown? We're shooting for Jan10' (that's 25 months starting now). You should average in on any drops of 5-10% below your most recent purchase price which should be around $30 for C, usb, and wfc; $41-2 for BAC and if GS goes to $180 I'll be in that too. Stir for 25 months and let's see if it�s yet another winning group. The goal will be an average total return of at least 30-50%. It's too bad you can't have targets of your own. ;-)

    • my method is plain old math for example I have a qqqq system that has 80% chance of 1n (~2%) return 15 to 20 times a year backtested for 10 years. Without leverage thats 20% - 30%. If both trains leave the station at the same time...

      Re henry the major problem is scaling + trading for clients, however I don't need anyone's money and a M trade in the q is nothing.

      Can you imagine trading say 10M with your 'system'? All those words wont help you sleep at night but you should be fine in say 18months.

    • Thanks for the compliment take2! Apparently, people tend to sound more like the things they study. I hadn't really noticed until you pointed it out but I guess my post do sound pretty professional (I don't think I've seen "upside down" before though). Becoming more like the things you study/practice probably applies to your method too but hopefully not to your returns because that Henry guy's returns are terrible. Again, I appreciate the kind remarks irt the professional quality of my posts. GL and Happy Holidays!!!... :-)

      GITA!!!

    • windfall, dominance, stagnate, growth segment, descent traction, pairing back, upside down, upside catalysts... wow you're becoming quite the analyst putting all those wordy words together!

    • Thanks..I think I agree generally, but I am not sure whether I would agree with the comments re: being the nintendo #2 supplier. double edged sword..The game price on the Wi is much lower than the comparables on the xbox and ps3/ps2....this seems to point towards lower sales and lower gross margin dollars (same percentage maybe but on lower sales/asp), and this has been a source of ERTS growth in the past few years....

      The base is most probably growing, but I am guessing that a lot folks playing old PS2 (that they purchased 4-5 years ago) are making the move to a newer platform, so it is a replacement cycle as well as broadening of the base...dunno...that could dampen the gross sales increase.

    • I agree about ATVI; the Blizzard deal is a windfall for them and I've been in that stock as well. My favorite recent ATVI trade was selling $27.50 Puts just before the deal was announced (those are looking strong to expire worthless..:-)...)

      I also agree with you irt NTDOY.PK's dominance and that bodes well for ERTS as they have now become the #2 developer of Wii games (right behind Nintendo itself). This was even mentioned in the recent Fortune Magazine article "The best stocks for 2008":
      http://money.cnn.com/2007/12/10/markets/best_stocks_2008.fortune/index.htm?source=yahoo_quote

      I think 08' could likely be the best yr for the VG sector; I already wrote about the huge yr over yr growth in the console base that will make for easy comps (mentioned in the first post in this thread). I'm going to be looking carefully at the sector as the end of 08' approaches but I agree that 09' or 10' will likely be a bit of a stagnate growth yr irt VG software sales for console's. PC growth will likely stay strong throughout but the big thing to watch will be the level of EA's MMORPG divisions. The consistent rev of that segment of the VG world would significantly help eps through any stagnant yrs. The casual gaming sector is another great growth segment in the VG industry that they have good exposure to.

      I'll definitely be watching their rollout of games like Warhammer, Army of Two, and Spore, among others to gauge the outlook. If they can get descent traction with Warhammer and a "Sim-like" success from Spore it will make me very happy and more positive irt 09'. Currently, I expect to be pairing back my position by the end of 08'/mid 09' but the degree of "pairing" will be based on quite a bit of what we see in early 08'.

      I agree that it's not as much of a value stock here. It was a good value when I 1st started "championing" it in Jun 06' (40% return into Oct/Nov 06' and almost a 50% return for anyone holding from then till right now). I've also written about how the upside down console transition cycle and delays caused the end 06' to late summer decline. Being a patient investor made it easy to wait through that time period while using options to boost returns. I still see enough upside catalysts to be in the stock though. GL

      HO! HO! HO!... GITA!!!

    • "Perhaps you would create less controversy if you allowed others to reach those conclusions about your posts."

      --> Thanks for the comments (all are welcome). Actually, "I was posting" what I've been told by many posters irt my posts (that they are quite often "interesting/thought provoking"). You see, I take the various things people say and evaluate them against the quality of their avg posts. In Justin’s case the quality of the vast majority of his posts is so bad that it makes his opinions pale in the face of the weighted avg of the quality of the posters who have been very positive. I always look at things very analytically as opposed to many people that just look at the surface of something. There was actually a post on the ATVI board that directly spoke against one of Justin’s posts and basically said "thanks for the great posts Flyer, please keep them up because I really enjoy them and think they are useful.

      Basically, like I've said before, opinions vary but performance and historical quality of posts speaks volumes.

      GL

      GITA!!!

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