I thought about naming this post "PM anxiety attack "
Updated: Feb 8, 2021 with new info.
Our role is to help investors better understand their risks and rewards from investing in the stock market. We also make proprietary investments.
So, last night I was relaxing and thinking about how $SMLP went up all day. Good feelings, posted a few tweets like this one, here. I was worried that the shorts will start coming out due to the recent stock rise in $SMLP, and confirmed that there are 400k shares available to borrow and short.
Well, I went to bed early after playing Pokemon (that is Oshawat visiting Sophia).
I woke up this morning and boom. $SMLP is down $4.50 a share overnight, from $20.50 to $16.00. My heart raced and I thought...It's ok, stay calm. Let's put in a buy order at market open...maybe it will hit $15.00 and I will buy more. I thought about a March vacation in the mountains...maybe watch a movie tonight.
Then, after coffee, checked social media, thought about quantum computing, wrote up today's to-do list, and even checked the NASDAQ volatility halts (there were 14 today). At 8:56 am CT (26 minutes into the trading day), I checked in on the stock. The stock was back where it was yesterday at close, and it was like after hours (AH) never happened. It was down $0.03.
OK, so what happened in after hours trading? Why would the stock drop 22% overnight. This same type of thing happened a few weeks ago when the stock was up ~70% AH. I have a few guesses:
1. The Yahoo Finance community for SMLP had a few ideas, here. They see it as someone selling 1 share at a time at progressively lower prices. Maybe the occasional 100 share sale to really move the price. Why do this? It creates a stock price 'mark' at the new lower level. It moves the goal posts for the stock from $20.50 to $16.00 in people's heads, even if subconsciously. One poster thought it was a sign that the short sellers were having a bad day.
2. There was a new SEC filing (might be 2 of them, but I only see 1), giving updates to prospectus documents, and publishing the formal details of their funding for the Double E non-recourse debt for $175M, to be backed by $15M line of credit against their existing lines. In Stocktwits, one poster suggested here that this was a sign that Summit Midstream was going to issue a new secured debt offering (maybe $400M), and others cried out "HY" for a new high yield offering. This could be positive if it pushed out maturities, lowered interest rates, and/or retired existing debt below par.
3. It was all fun and games. Say it took (legally) a buyer and a seller to trade 500 shares over the course of the night. At first, the seller loses say $0.10 a share, the $0.20, and so on until losing $4.50 per share by the end of the game. On average, they lose $2.25 per share on 500 shares, or $1,175. Maybe they made a bet with a friend, for $2,000, that they could drive the price down to $16. Maybe they want to buy shares, and feel mad they missed the $15 price last week? Or finally, maybe they are working on behalf of those who profit from a volatile stock price (e.g., swing traders), who stand to make much more than $1,175 on a good day of trading.
Feb 8, 2021 Update: Today I checked the pre-market pricing through Vanguard. The bid was 16.50, the ask 20.48. So, any investor with an appetite for change just has to buy a few shares pre-market. We believe that when the market opens at 9:30:00 ET...the liquidity returns and the pricing goes 'back to normal.'
In addition, short shares available for SMLP remain at 400,000, with a fee reduction from 10% to 9.3%. Not sure exactly what this means...but likely it means that no significant shorts were entered in the past week of trading, and that holdings are settling down.
Finally, here is a link to "Sammie" and "Tom" on Yahoo Finance Conversations about SMLP. They mentioned our YouTube video for this week.
In conclusion, I learned 3 things:
1. I have a strong level of conviction about holding this stock. I saw a 21.95% drop as a buying opportunity. Having conviction, backed by fundamental analysis and research, keeps the anxiety in check and allows for sustainable investing.
2. Being in a stock that is low capitalization, trades with low volume, and seems to have very few eyes upon it, seen here, can be moved significantly overnight. It snaps back when the market opens, but the subconscious price impression is made.
3. When you see people buying or selling (1,10) shares of stock at a time, it is often to move a stock. The math is clear...if you own $1M shares of a stock, and it costs you $1 to move the stock $0.01, you just made $9,999 in in unrealized gains on your investment. This logic is why I started following social media for the stocks I invest in...that same logic works for a small investor that only holds $10,000 shares and seems like a sure thing.
And finally, market manipulation is wrong and I believe illegal. If there are people buying and selling to themselves just to move the prices, or two parties colluding to move a price (say they traded last night, then transferred the 'lost' $1,175 to the other person), then they should listen to the Baretta theme song, here.
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Good morning Chicago Quantum (SM) friends, and Chicago Quantum Net Score followers. Two nights ago, and into yesterday's trading day we ran a 3,500 stock analysis. All stocks in the NYSE, NYSE American, and two NASDAQ exchanges, after they pass data validation.
A few things happened that are relevant for our customers and colleagues:
1. For about a day, Yahoo Finance fed blank data into historical stock prices, but only the second time we downloaded them, and only from NASDAQ stocks (NYSE and NYSE American were ok).
Over the course of 3000+ stocks, we were ending up with 39 days of complete data, or worst case, 3 days of data (out of 253 days). We validate the data the first time, remove stocks that fail data validation, then we download and validate again. During the second step, historical price and volume data was missing from 13 stocks (we kept a record of the names and exchanges - they were all from NASDAQ). This self-corrected ~36 hours later. A long-term fix is to buy market data services with service level agreements.
2. We ran the analysis on our server, and with the system, code and template defaults it found the best portfolios. We went back and re-ran certain solvers for 2 hours...with no change. When we ran on our iMAC, we found good portfolios, but after re-running for an obnoxiously long time (many hours), we did find better portfolios. Processing power matters.
3. When we change our risk setting from medium to low, we get many more stocks (e.g., from two to seven), and we see companies added that better diversify out the risk. We are still in the range of 3,500 reducing down to a portfolio of 5-8 stocks with a low risk setting.
4. We ran on the D-Wave Systems Advantage 1.1 and it ran well. Out of ~15 runs, we hit a 4-stock portfolio that was in the ballpark of the good answers (not best, but good). Here are some D-Wave Systems Inspector pictures (attached below).
We also shared some skewness, kurtosis and variance data on individual stocks on Twitter. We also shared all the negative BETA stocks we found on Twitter. We picked up a few likes, but that was all.
Finally, today spent time recreating the 13F filings for the one stock we are long in: Summit Midstream LP (NYSE: SMLP). This is not simple when the stock changes CUSIP, goes through a 15:1 reverse split, and the filers do not file quickly...we are stuck looking at Dec 31 and Sept 31 reporting and trying to reconcile and guess. However, we did find the names of a few large money managers. Should we call/write them about our capabilities?
Net-Net, what did we learn?
Once our business grows (revenue), we need to:
- Buy more powerful server(s) to save analysis time
- Arrange to buy market data services with 'guaranteed' access
Keep adding solver capabilities to our platform (e.g., IBMQ, gekko, quantum walks on graphs, etc.)
It is nice to share data with the general population, but not sure anyone values it.
1. We are thinking of lowering our riskfree rate floor below 1%. Thoughts?
2. Should we add NASDAQ Capital Markets (SM) into our analysis, despite the compliance & listing requirement differences?
3. Can we simplify our pricing? Do we have too many options? Should we consider a subscription model?
Disclosure: I/we are long $SMLP (the CQNS model choose it months ago, and earlier in January), which caused us to do significant fundamental analysis.
Thank you again for reading.
Jeffrey Cohen, President, US Advanced Computing Infrastructure, Inc.
Jan 29, 2021
Jeffrey Cohen, President, US Advanced Computing Incorporated.
Hello to our faithful readers. We just published two Medium articles with recent stock picks.
Three key takeaways:
1. You can see the stocks we picked, and how they all beat the market benchmark (the SPY, or S&P 500 ETF). These will likely continue to outperform. Our President, Jeff, has money invested in one of the stocks that was picked.
2. You can see how a dividend-payer only portfolio behaves differently than analyzing all stocks (regardless of dividend).
3. You can see how we incorporated a 'risk tolerance' parameter into our model that we are considering to add to our public offering. We can incorporate it, but would like some market feedback first.
Happy reading. Hope you continue to learn from our use of a quantum algorithm on quantum and classical computers to pick stocks. We believe we have found financial advantage from this work.
Hello all, we remain very busy.
1. Quantum walks on graphs
2. Using the IBM quantum computer to pick stocks (we always used D-Wave or classical)
3. Learning about Microsoft Azure for quantum and quantum-inspired
4. Lots of small improvements to our stock picking application
5. Increasing our use of advertising over Q4/2020 to attract people to our website, Facebook page and LinkedIn page. Increased activity on Twitter. Decreased activity on Medium.
On the 'however' side, we are a bit distracted by the movements in the stock market. Significant learnings underway about how the stock and options markets work.
Give us a shout at email@example.com
Strategic IT Management Consultant with a strong interest in Quantum Computing. Consulting for 29 years and this looks as interesting as cloud computing was in 2010.