I have been running screens today and found this company, Affiliated Managers Group - AMG. It reports earnings on October 25th. The ratios appear a little bit rich, volume has been dropping and the amount of short shares has not decreased in a while. The chart is hinting at me that the holders are attempting to sell into strength. If the earnings call is not good, then it will drop like a rock.
I can definitely see this playing out the way you described. Are you short or planning on getting short b/f earnings?
Im going to look at different possibilities in either buying puts or shorting before the call. The more I research this company, the more reason I have for shorting it. Since Oct 10th, the stock has lost about 7% of its value (from 100 to 93) on strong volume and there were no press releases to give anyone any reason to sell. I believe there might be a correlation between the Legg Mason selloff and AMG though. If the the shareholders were confident then the stock would be running up or holding steady until the earnings call next week. The short and put interest seems to suggest bearishness. Last conference call was very good and the board had announced a repurchase program for the shares. So if the next conference call is going to be good as well, then why isnt the short interest retreating, who is buying these puts, and why has the share price dropped 7% in a short amount of time. The price is now sitting right below both the 50 and 200 day moving averages. 50=96.25 200=94.14 The last time it went under the 50 day it lost 20% of its value (Mar-Apr 2006). There is definately a rough double top on the 1 year chart. This organization is very closely affiliated with a group of money managers, including Tweedy, Browne, Friess Associates, Essex Investment Management, Third Avenue Management and Frontier Capital Management. Someone must have tipped them off to sell. However, what is very telling to me is the insider sale transactions. Sean Heeley had purchased shares last year, but this year he is dumping. In August, he had unloaded 217500 shares. John Kingston was buying last year and now he sold in August too. There appears to be many other company officers that had purchased last year and sold off suddenly between July-August. If they had confidence that the next conference call would be good, wouldnt they have purchased like last year? What makes me the most uneasy is that management is appearing greasy. I think they repurchased the shares not from the open market, but from the insiders who sold their shares in July-August. That appears very suspect.
Im going to buy the puts. The problem is here if they do have something good to say then the stock might rocket up on a squeeze. I have less risk with the puts. I will look at exactly which ones tommorrow, Im going out tonight. There is a chance that this could be a headfake.
Oh my god. The conference call was awesome. I raise my hands in defeat. I shouldnt bet against the money men...