Still trying to find my way through TA and trend following, I chose to scrutinize a company that I picked to be in my portfolio at my internship. Back in October, I looked at FDX for a long position to fill out a portfolio of blue chip dividend paying stocks for a model client portfolio. As luck would have it, the stock then rose from $170 to $200. I was happy with the result of the trend, however, as it approached $200, I felt uncomfortable keeping it in the portfolio. I thought it was overreached.
This is where I fight the deep value investing principles of "buy and hold" with the trend following rules of riding profits and taking profits when the trend has run its course. I am still trying to find a middle ground, I am getting closer.
Looking at the daily charts, FDX is hanging on to support at the 186.39 level. As of yesterday it crossed its 50 MA in a bearish manner, but I am looking for a confirmation and continuation of the bearish sentiment, and I like the probabilities.
Fundamentally, I wanted to get rid of FDX due to increased debt accumulation, decreased cash, and negative free cash flows. With a PE Ratio of 26, its more expensive than 73% of its competitors. Its trading 3.26 times book value, putting it more expensive than almost 90% of its competitors. Cash to debt ratio has decreased each year over the last four years, going from 1.64 in 2013, to 0.26 in May 2016. Enterprise Value for FDX has increased over the last four years from 28,572 to 54,136 in 2016, that's a high price tag for 26 times earnings.
For these reasons, I give more weight to the bearish probability outcome than I do the bullish one. Could the fact that I've found more shorting opportunities in larger cap "blue chip" stocks mean something for the overall market? I'm not sure. Would love some feedback.
If FDX breaks current support, look to take profits around the 200 MA. Not the greatest Risk Reward Ratio: 1.49, but nevertheless, interesting to see what happens.
This is where I fight the deep value investing principles of "buy and hold" with the trend following rules of riding profits and taking profits when the trend has run its course. I am still trying to find a middle ground, I am getting closer.
Looking at the daily charts, FDX is hanging on to support at the 186.39 level. As of yesterday it crossed its 50 MA in a bearish manner, but I am looking for a confirmation and continuation of the bearish sentiment, and I like the probabilities.
Fundamentally, I wanted to get rid of FDX due to increased debt accumulation, decreased cash, and negative free cash flows. With a PE Ratio of 26, its more expensive than 73% of its competitors. Its trading 3.26 times book value, putting it more expensive than almost 90% of its competitors. Cash to debt ratio has decreased each year over the last four years, going from 1.64 in 2013, to 0.26 in May 2016. Enterprise Value for FDX has increased over the last four years from 28,572 to 54,136 in 2016, that's a high price tag for 26 times earnings.
For these reasons, I give more weight to the bearish probability outcome than I do the bullish one. Could the fact that I've found more shorting opportunities in larger cap "blue chip" stocks mean something for the overall market? I'm not sure. Would love some feedback.
If FDX breaks current support, look to take profits around the 200 MA. Not the greatest Risk Reward Ratio: 1.49, but nevertheless, interesting to see what happens.