A fuller write up later. But take a look at CVGW before the market closes in another ten minutes.
Disclosure: I’m long.
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I hope you bought today at the lows.
Andy
Andy,
I didn’t catch the low. But my entry at 23.21 was good enough for the girls I go dancing with, and I ended the day up 2.76%.
Arindam
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Earlier in the day, having put on position in wheat, which is an easily traded commodity --unlike olive oil, which is what I’d really like to trade, but couldn’t find a way to do so–, I went looking to see what the action might be with wheat producers/processors like ADM or Cargill and stumbled across AVO that focuses on avocadoes and blueberries.
“Fun”, I thought. “Just the sort of obscure, under the radar company that Peter Lynch used to buy, for the same reasons.” Its fundamentals and chart seemed reasonable. So I put on a position and continued my search, which led me to CVGW, down hugely on a recent earnings report.
Some quick charting and green eye shade work suggested the selling was overdone. So I pulled my position in AVO and bid for CVGW instead, never mind that our dear forum hosts, the Motley Fools, was panning the stock, not that they ever get their timing correct that I’ve ever seen, for always being late in and late out, as many disgruntled subscribers to their newsletters confirm.
So, who will prove to be right? Them or me? For sure, as the company fully acknowledges in its conference call, CVGW faces challenges, chiefly current product oversupply to the market and some “restructuring” nonsense. But its balance sheet met my vetting, and the market confirmed my entry was correct.
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Arindam
Due to Powell saying that he will raise rates higher and possibly faster than most had expected are you concerned that CVGW could go down a little more? I think its a good buy btw, but I was also discussing this trade with my wife and this came up…doc
Doc,
Powell hasn’t a clue about how to fix a problem he and his buddies created, namely, abetting Congress’s deficit spending. The problem really began three decades ago when ‘Easy Al’ bailed out LTCM, and it was made worse with the repeal of Glass-Steagall. Despite trillions of dollars of 'stimulus", we’ve been in a depression since '08 (aka, a sustained period of below potential growth). For sure, a lot of money has bubbled up the prices of financial assets. But that’s a mirage that soon will fade. So I’m not worried about losing a few bucks on a fun bet on CVGW. That’s small potatoes compared to what happens if CBDC’s get rolled out. That’s what I worry about, not losing some of my money due to my misjudgments about markets, but having all of it confiscated.
Arindam
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CVGW is way undervalued right now and has a very good upside potential. I’ll be watching it tomorrow…doc
re: CVGW
CVGW tends to rise after each posting of the earnings report.
eg. 12/21/2020, 12/20/22 and 03/03/23.
“CVGW tends to rise after each posting of the earnings report.”
Quill,
That is NOT what happens. In the previous two years, CVGW has reported earnings 8 times. (Charted below.) Six of those times, PRICES FELL immediately after the report. For sure, the Mar '22 reaction could be quibbled about. But the overall trend is clear. CVGW’s earnings reports tend to disappoint and to be punished.
How true that is of other companies generally, I don’t know. But it would be easy to quantify and to game. In fact, I’ve got a friend who does just that. Based on his guess about the reaction to various company earnings reports, he uses options to make a directional bet and does well.
What I would say about your comment about how prices might react to earnings reports is that you’re constantly looking for “The Holy Grail” , as you admit. You would like to find a single key to unlock the market’s hidden wealth. Hence, projects like Simon Says.
I take the opposite tact. For sure, stock prices aren’t random, despite academic claims they are. Nor are they just Markov chains, as the fundamentalists claim. Instead, the best description seems to be they are quasi-randomly path-dependent. Hence, nearly any investing method or trading system will work some of the time. But nothing works all of the time. Therefore, one’s entry/exit rules are very, very secondary to one’s risk-management rules.
Said another way, if you bet the farm on a supposed “sure thing”, and “the market” does what it generally does, which is to trip the arrogant, them who failed to even imagine they could be wrong get themselves thrown out of the game.
Arindam
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Jeff,
If you’re talking about CVGW, there wasn’t “a signal” yesterday, nor today. There was just a trader’s hunch --backed up by some quick, green eye shade work-- that the selling was overdone. In short, classic Ben Graham-style value investing, or Justin Mamis-style technical investing.
Here’s a similar situation. Yesterday, on a chart with daily bars, there was no ‘Buy’ signal for copper as a tradable commodity. But look at the price action today, with 1-minutre bars, a nice 2% move up.
Could one have positioned oneself to have captured that move? Probably, and the thinking would go like this. Powell said he will continue to raise rates. That will exacerbate inflation and promote a continued rotation into hard assets, of which copper is a frequent choice. Therefore, the trade would be to buy copper yesterday and to wait for the pop today and, if/when it did happen, to grab the profit and get out and back on the sidelines.
In short, “Skate to where the puck is going to be.”
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One’s winners teach little. It’s one’s losers one learns from, or else gets thrown out of the game.
But, yeah, I lucked into CVGW, just as I was lucky at getting out of AVO yesterday on a scratch, CVGW’s competitor that’s down today and reports tomorrow. But if anyone is looking for a speculative investment similar to CVGW, then AVO wouldn’t be a bad choice, given that its fundamentals and prospects are similar to CVGW. The trick would be getting into it a sufficient discount to fair value that one’s downsides are minimized (aka, standard Ben Graham tactics.)
So, what might be ‘fair value’ for AVO? The fundie website I depend upon says FV for AVO is $10.11 (using a DCF model), and the stock closed around $11 today. By comparison, they estimate FV for CVGW to be a whopping $43.64, which is nearly twice its present price of $24 and change, or a discount of 45%.
But my thinking is this. Both are going to succeed or fail for (mostly) being in the same business of marketing avocados. One doesn’t need to own both, but both should be tracked if either is owned.
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Since CVGW missed, would you anticipate AVO to miss and buy after the drop? Just a thought…doc
Doc,
AVO has a history of missing, and they did so again today. Closed at 10.75, but dropped to 9.25 in the after market.
I was waiting to see if CVGW drops on this news. I saw it went up yesterday but drifted down during the big drop in the afternoon. It did well yesterday as far as I’m concerned.
I bought UCO in the morning and watched the price of crude oil. When it peaked and turned down, I sold UCO and bought SCO. When it gave me a red bar, I sold it and made some change (around 50 cents) on the (daily) teeter totter lol. Ate some lunch and saw that crude continued down and SCO continued up.
I watched PSQ and TQQQ yesterday too…doc
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Here’s the AVO earnings report. Experts predicted 1 cent loss and AVO had 12 cent loss. Management said things should get better this quarter…doc
Mission Produce Inc. AVO, -2.72% stock dropped more than 13% in the extended session Thursday after the avocado producer reported a wider-than-expected quarterly miss and said that its avocados and other fruits fetched lower prices. Mission Produce said it lost $8.8 million, or 12 cents a share, in the quarter, compared with $13.4 million, or 19 cents a share, in the year-ago period.
Follow up on that avocado trade.
It took longer for the trade to begin working than I expected. But TD is marking me to market as being up 15.6%, which is decent money for a 12 market days holding period.
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CVGW keeps rising, great trade…doc
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Doc,
I didn’t put on CVGW as “a trade”. It was intended to be a longer-term play. But yeah, the bet is paying off, and I’m up 19.6% on it, whereas AVO --put on at the same time-- is a scratch at +1.8%, as is are HRL +0.2%, TSN +2.6%, and WEAT +2.1%.
What is doing well --and also not intended as “a trade” – is URNM +10.1%. Penny stock ASM +34.5% is kicking derrière, as are my other bets on silver and the miners: SILX +24.4%, SVM +24%, etc.
But if truth be told, I’m down a bunch on some oil patch bets for having been too early. So, win some. Lose some. But my real focus now is on how to position myself for the coming Greater Depression.
One huge disappointment as been SCHW. I got in 47 and change, watched it run to 59 and didn’t take profits for being sure it would go even higher. WRONG! And today it was downgraded to 'Hold" – which is code for ‘dump’. I’m still ITM on it, but I’m not going to add. There’s more trouble coming for all of the financials.
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I think the oil patch will start to heat up now that crude is climbing. I’ve been watching NEX and RES. I’m also accumulating HAL. I think your oil play is smart…doc
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The rise in oil pries isn’t a certainty, not that anything about markets is a certainty except some losses. LOL
But my worry is this. Central Bank money printing --by our own and others in the US-aligned world-- will exacerbate inflation, which traditionally moves money into hard assets and natural resources, which is what we’re seeing. OTOH, rising inflation will dampen economic activity --which we’re also seeing in the continuing layoffs, strikes, etc.-- which will dampen demand, even as supply increases. How that tug of war gets resolved is anyone’s guess, especially given the stupidity with which the US is prosecuting its financial and economic wars with Russia, China, Iran, Syria, North Korea, portions of Africa, most of Central and South America and the increasing effectiveness of those countries in undercutting the $US, hence, US hegemony.