The Da Vinci Invest Code - How corporate News move the equity markets
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The Da Vinci
Invest Code
How corporate News
move the equity markets
A product from
Overview
1. Introduction
2. Key data in corporate news
3. Case Studies
SAP
Microsoft
Oracle
4. Company
© 2012 The Da Vinci Invest Code Page 2
page
3
Introduction
Corporate news influence
the equity markets
Unexpected corporate
news create market
trends and investment
opportunities
The Da Vinci Invest Code
© 2012 The Da Vinci Invest Code
page
4
Introduction
Over 5000 news daily
Pre-news published by
government agencies,
courts, corporate
sources and reputable
blogs
Scheduled and
unscheduled events
Social media like tweets,
blogs, boards, foren and
social networks
The Da Vinci Invest Code
© 2012 The Da Vinci Invest Code
Key data in corporate news
Key market moving data of the corporate news
• Earnings guidance
• Profit warnings
• Dividend proposals / announcements
• Earnings per share (EPS) / loss per share
• EBIT / EBITDA
• Free cash flows
• Operating profit / loss
• Revenues / sales / turnover
• Tier 1 capital ratios / solvency ratios
• Analyst research reports on initial coverage, recommendations and sector
• Credit reports on upgrades and downgrades
© 2012 The Da Vinci Invest Code Page 5
Case Studies: SAP
Trading opportunity:
SAP announces record 4Q 2010
(13 Jan 2011)
• SAP releases ad hoc news
Unscheduled, unstructured news
Distributed by news companies at 16:44:17 on
13/1/2011
―SAP announces record fourth quarter 2010
software revenue: Software revenue increases
around 34% (around 24% at constant
currencies) to approximately EUR1.5 billion.
Full-year 2010 non-IFRS software and software
related service revenue increases around 20%
(around 13% at constant currencies) and
exceeds company guidance. […]‖
© 2012 The Da Vinci Invest Code Seite 6
Case Studies: SAP
SAP (ISIN DEO007164600) Significant market reaction after 7 seconds
16:44:24 – Significant price and volume boost / 13 January 2011 16:44:17 - Release/event
© 2012 The Da Vinci Invest Code Seite 7
Case Studies: SAP
SAP (ISIN DE0007164600) A closer look at the seconds following publication
13 January 2011 16:44:17 - Release/event 16:44:24 – Significant price and volume boost
© 2012 The Da Vinci Invest Code Seite 8
Case Studies: Microsoft
Selerity Scoops Microsoft Earnings Using
Proprietary Real-time Search an
Hour Ahead of News Outlets
• Summary
Microsoft (Ticker: MSFT) Using proprietary low
latency search & extraction technology, Selerity
was able to uncover and publish a public
version of Microsoft’s earnings release an hour
ahead of other media outlets. Selerity’s event
data and machine-generated news was
immediately distributed over its low-latency
infrastructure giving clients an incredible
opportunity.
While many awaited the results after the close,
a number of astute investors observed the
actual results from Selerity.
Other media outlets were also quick to
recognize Selerity for its successful delivery of
the data.
© 2012 The Da Vinci Invest Code Seite 9
Case Studies: Microsoft
Selerity Scoops Microsoft Earnings Using
Proprietary Real-time Search an
Hour Ahead of News Outlets
• Wall Street Journal reporter Kristina
Peterson made the following observation,
―It turns out that Selerity, a company that
gathers event data for traders, seems to
be the first to have stumbled upon the
Microsoft earnings release.‖
• Ms. Peterson adds that, ―the company’s
real-time search engine, which scans the
―investor relations‖ websites of public
companies, picked up what appeared to
be Microsoft’s second-quarter earnings
release this afternoon — well before its
expected release after the market’s
close.‖
© 2012 The Da Vinci Invest Code Seite 10Case Studies: Microsoft
Microsoft Share Price Reaction
• Selerity publishes values for Earnings
Per Share (EPS) ($0.77), Revenues
($19.95 BLN), and Net Income ($6.634
BLN) at 2:50 PM EST.
• Other media outlets began reporting on
the data just before the market closed.
• Given the volume and liquidity in both
Microsoft stock and equity options,
traders had the opportunity to build
sizeable trades and capitalize off
Selerity’s timely capture of the data.
© 2012 The Da Vinci Invest Code Seite 11Case Studies: Oracle
Overview
• Oracle (ORCL) is scheduled to report 1Q
2014 earnings after the close of trading
on Wednesday, September 18. The
software giant is expected to report its
earnings right at the closing bell and host
a conference call at 5:00 p.m. EST. Look
for a possible reaction in the index
futures and broad market ETFs when
results are disclosed.
© 2012 The Da Vinci Invest Code Seite 12Case Studies: Oracle
Outliers & Strategy
• Key Measures:
• Non-GAAP Earnings Per Share (EPS): Back in July, Oracle stated in its 4Q 2013 earnings
conference call that Non-GAAP EPS for the current 1Q period is forecast to range between
$0.56 to $0.59, up from $0.53 last year. The current Street estimate is at the low point of the
range at $0.56 (Source: Yahoo! Finance).
• Revenues: Oracle indicated it expects 1Q 2014 total revenue growth on a GAAP and Non-
GAAP basis to range from 3% to 6% in constant currency. That would equate to $8.456
billion to $8.703 billion. The consensus is toward low end of that range at $8.48 billion.
• Note that Oracle tends to report guidance on the ensuing conference call at 5:00 p.m. EST,
an hour after the earnings release. Analysts are expecting 2Q 2014 Non-GAAP EPS of
$0.69.
• With Oracle drifting below the 52-week high established in March, shares are trading at just
10.42x forward earnings, well below historical averages. A FWD PEG ratio of just 1.29
suggests the shares are trading slightly above the estimated earnings growth rate.
• Last quarter, in line results on Non-GAAP EPS sent shares lower by about 9%. The average
one-day price move off earnings is 5.85%. The options market is currently pricing in a similar
reaction to historical averages.
• Sympathy Plays: Accenture (ACN), International Business Machines (IBM), Cisco Systems
(CSCO)
© 2012 The Da Vinci Invest Code Seite 13Case Studies: Oracle
Recent News
• 09/17: According to a post by Investor’s Business Daily, RBC Capital Markets analysts are
looking for a solid report, mainly due to solid execution, currency headwinds, and
improving macroeconomic trends. The firm also sees a stabilizing hardware business by
the second quarter of 2014, a sentiment that was mirrored by Wedbush Securities in the
same article.
• 09/16: Oppenheimer & Co. is looking for in-line results, and a rise in share price, according
to a post on WallStCheatSheet.com. The firm reiterated its Outperform rating, citing checks
that show business trends improving.
© 2012 The Da Vinci Invest Code Seite 14Seite
15
Technical Review
Oracle shares have just
reclaimed its 200 day-SMA,
while simultaneously
clearing a descending
trend-line dating back to the
52-week highs from March
(albeit on average volume).
The stock is essentially flat
this year, which is a
disappointment considering
the S&P 500’s nearly 21%
advance. If earnings
surprise to the upside, look
for initial resistance near
$34.80, followed by recent
highs of $35.32. Should
earnings disappoint,
support can be found near
$32.50, followed up $31.50.
(Chart courtesy of
StockCharts.com)
Case Studies: Oracle
© 2012
© 2012 The The Da Vinci
Da Vinci Invest
Invest CodeCodeSeite
16
Summary
Oracle shares are back above
the key 200-day SMA ahead of
the 1Q earnings release,
thanks in part to an improving
macroeconomic backdrop. But
with last quarter’s surprisingly
weak results fresh on the
minds of investors and a
cautious IT spending backdrop,
Street sentiment is mixed
ahead of the 1Q numbers.
Nonetheless, Oracle also
boasts a broad product mix and
diverse customer base which
serve to insulate the company
from the broader market fears,
while enterprise growth and
valuation have lifted the stock
off of the lows established
earlier this year.
Case Studies: Oracle
© 2012
© 2012 The The Da Vinci
Da Vinci Invest
Invest CodeCodeCompany
Hendrik Klein is a 38 years old German living and working in Switzerland.
He graduated with a degree in Business Administration from University
FH Mittweida in Germany. He is one of the youngest traders to clear the
EUREX trader certification and working on the Frankfurt Stock
Exchange Floor. Worked with well known names in the area of fixed
income and market neutral trading in Europe. He is specialized in
Relative Value options trading, Global Macro strategies and investments
in alternative asset classes.
Hendrik worked as a broker and general agent with leading German
private banks. He was the head of equity and equity derivatives
proprietary trading at Landesbank Baden-Wuerttemberg.
Hendrik co-founded Da Vinci Invest in 2004 where he is the acting
CEO/CIO. Da Vinci and its products won various awards in Europe for the
superior risk-adjusted returns. The specialty of Da Vinci relative value
and superior risk management ability is well recognized in the finance
industry. Hendrik is an active participant in various media/panel
discussions (eg: CNBC) and chaired various global conferences
Europe and USA. Hendrik lives with his wife and 2 sons in Zurich.
© 2012 The Da Vinci Invest Code Seite 17Da Vinci Invest AG
Hendrik Klein
Zugerstr. 46
CH-6314 Unterägeri
Phone.: +41 41 511 83 40
Fax. +41 41 511 83 49
Email: info@davinci-invest.ch
For more Information:
www.davinci-invest.ch
A product fromDisclaimer Provided for information purposes only. This material is not a solicitation or an offer to invest with Da Vinci Invest Ltd. (―DAVINCI‖). Furthermore, the information included in the present document, has been placed there by DAVINCI as a service. DAVINCI has not taken any steps to verify the adequacy, accuracy or completeness of any information. DAVINCI nor any of its respective affiliates, officers, directors, agents and employees make any warranty, express or implied, of any kind whatsoever, and none of these parties shall be liable for any losses, damages, costs or expenses, of every kind and description, relating to the adequacy, accuracy or completeness of any information in this document or the use of this information. As with all historical performance data, it may not be used to predict future characteristics or performance of DAVINCI or relied on in making any investment decisions. Past performance is not indicative of future performance. © 2012 The Da Vinci Invest Code Seite 19
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