DWA, Insiders, Option Activity and stuff!
A Week Ago
Just a week ago, Pixar International, Inc (PIXR) reported outstanding results based on their biggest hit thus far - "The Incredibles". Investors rewarded the shares of Pixar with a modest gain.
Dreamworks Animation (DWA) on the other hand was expected to come out strong with its results today, which it hoped would be due to the strong sales of the Shrek 2 DVD. The DVD did not sell well, and the stock plunged close to 19% after hours. Now as I was reading the report, I came across this link in which the journalist talked about Dreamwork Animation's CEO Jeffrey Katzenberg telling his colleagues on Monday morning (05/09/2005) that the earnings were going to be surprisingly weak. Well, I personally thought that it was illegal for a CEO to announce to his insiders that way. It could have caused some stock manipulation. I talked to a investment buddy of mine, and he says that it might be a deterrant for the insiders who already knew to sell, as it would make them privy to insider information and make their trades illegal. I had to agree with him as it is one of the rules the SEC has been trying to enforce since inception.
However, the one thing that surprised me is the amount of put volume on DWA today. The total number of puts today were 3656. This would not be too much if the average volume everyday was not 263. A increase in factor of 13.8 just before the awful earnings smells fishy!
On the call side of things, the call Volume on GlaxoSmithKline (GSK) was 108858 when compared to the average daily volume of 5941. A 1800% increase on no news, at least by the time the market closed. What happened afterwards was that they came out with a drug for heart inflammation which shows promise in their Phase I trial. Go figure!
On the other hand, I just ran my screener and found out that insiders at Chesapeake Energy (CHK) were buying stock. Not surprising since they know the most about the energy situation, and how it is going to be. Not a bad company which deals in Oil and Natural Gas Exploration and Production, with a fairly decent P/E. I do not like their cash situation though (N/A as per Yahoo Finance) and 1.7 Billion in debt. However, S & P reports show that it does fare well against its industry peers. I wonder what the insiders are seeing!
Well, one more interesting thing is that in the S & P today, there were 54 advancers to 446 decliners. The ratio is 9:1 in favor of decliners, but for me to worry, I need to see the downside to upside volume ratio also. There was no free site where I could get the upside/downside volume ratio. I came across a site called ValueLine which charges an exorbitant sum for it, and I decided to spoil their party sometime this summer by writing my own webservice for it. Maybe I can use the Google (GOOG) API. I normally dont go after technicals, but the program trading (36% of the trades executed - some dude on CNBC) can cause enough volatality to send the market into a short term tailspin.
Also, on another note, why do Hedge Funds cry so much when they lose a substantial sum of money? GM went up a not-so-great 18% and the Bonds crashed the next day causing a double whammy, yes, but how can one complain about a stock run up on genuine news? Damn, these guys make me sick!