Private Equity | stockbee

7/05/2007

Private Equity


Going by Economist cover indicator, private equity may not be in big trouble. This one is difficult to game, but BKX and FIG may not be bad for trade based on this cover.

10 comments:

F. said...

Haven't read the article yet, but it seems to me that funding liquidity is different from market liquidity. Liquidityblog.blogspot.com is a great resource to learn more about this. Funding liqudity is likely to continue in the longer term because it takes a long time to change the behavior of investors such as the baby-boomer population. Clearly, the trend is to provision for the future by investing heavily.

Market liquidity can dry up, however, causing a sharp stock market correction. This can be sudden but it is unlikely to have a material effect on the habits of private investors (private equity) and their hunger for yield.

In the longer term, the private equity boom is much more likely to form a gradual top over time, and less likely to peak and fall as the magazine picture shows.

AJ said...

Hi Pradeep,
The 'Economist cover indicator' didn't work for calling a top on AAPL. Or do you think it might take a while longer?
AJ

mrstrader said...

I hate to admit this, but everyone was so sure that Apple was topping that I took it as a counter indicator and bought last week. Maybe we need a technical analysis of this.

Pradeep Bonde said...

There are no certain things with any indicator. When Apple did not rally in to launch and did not break down, I also bought it. AAPL was also EP candidate this week.

Pradeep Bonde said...

F
you are right. In fact the article says exactly similar things.
That blog is interesting.

JS said...

What is your typical $ size for trades? You mention you bot AAPL, on EP event. At these high prices, how much $ would you invest in it? Also, what would your exit point be? Will it be based on a target % move up, or a spefic price target or would you ride it with stops?

Pradeep Bonde said...

$ size for trades is function of risk on a position. I risk typically 1% on a position.
To illustrate this
Starting equity = 700000
Risk = 1% = 7000
Stock entry price= 20
Stop= 19
Amount invested= 20*7000/(20-19)= 140000
So dollar value depends on total equity at that time plus stop.

I have the in house programmer built a tiny application to calculate this dynamically and earlier used to take exact say 1117 shares kind of positions but nowadays I just round them up approximately.Sometime account will not have that much cash, so I buy up to the extent of cash available.

In case of AAPL, I am riding it with a stop.

christmasfern said...

anyone buy TCN today?
i did but i have to admit that i dont even know why it was up so much yesterday.

JS said...

Thks for illustrating the method. But the stop is so tight, there is hardly any breathing room, so how do u make sure you dont lose 7k (as in this example) each time u use this? In other words, one must be quite sure the stop will not get hit b4 it goes up. How do u manage this?

Pradeep Bonde said...

That was just illustration. My stops is at 3 day low before entry day. If you select stock likely to go up a lot, they seldom have pullback after 4% breakout or EP.
Stocks in IBD 200 list and Double Trouble universe generally fall n to that category.