Welcome to Money BAL(L)!


As promised, we’ve finally come through with the goods and created some graphical goodies for Money Ball. This promises to be the first of many Money Ball analysis pieces covering a wide range of financial assets (and perhaps other interesting things) so firstly, welcome to the page! We are still fairly green so feel free to drop us an email at cam@bluelakeinvest.co or mick@bluelakeinvest.co with any thoughts, comments, death threats etc. All analysis is our own, we use publicly available data (often via Quandl & Yahoo Finance) and we hope to expand the depth and scope of our analysis and coverage as we develop ever more sophisticated (read: profitable) models & techniques.

Our first equity in question is BAL, otherwise known as Bellamy’s (Unfortunately, we could not get stock quote ASX:BAL this time.). They’re a mob from Tassie producing all the great organic goodies particularly loved by our Chinese friends, and as they have been going great guns since the start of 2015 we thought we’d dig a little deeper and see if we can make some profitable insight into the way this stock seems to trade. We’ve already covered some of the underlying factors that have led to the explosive growth in BAL (see: The Boiler Room for further information here, we’re talking facts such as a 600% increase in net profit FY14 to FY15)  however we have not gone into price reactions and implications of the seeming sensitivity of this stock to good news. Enter Money Ball.

BAL_JPEG_1

As you can see growth really started taking off in February 2015 (wish you bought in then hey Mick? I suppose April was still pretty good) and has almost been universally positive since then. Note the daily log differential (the dark blue line) has been roughly constant over the analysis period, indicating stability in the magnitude of daily gyrations (as a percentage, NOT as an absolute dollar amount). What do we take from this? BAL seems to exhibit a pattern when responding to market news, and we should learn from it to make money.

3 of the most influential news pieces concerning the boosting of BAL have been supply agreement notifications, bullish profit guidances and a thrilling yearly report. These announcements concentrate from about June and this is where things start to get interesting.

BAL_2

The dark blue line in the chart above gives you the daily range of BAL over the same time period as the first diagram. As you can see, when the news gets better, so too do the gains, assuming you buy it at the right time. Obviously absolute daily ranges increase over the time period due (in part) to the equity value increasing, but note that they coincide with a higher instance in positive daily movements (the light blue line). Summary? We see the value of BAL gyrate within a larger range as good news has been released to market, but these gyrations have been skewed (in net terms) as positive, meaning after a period of good news BAL is very likely to see sequential trading days where CLOSE PRICE> OPEN PRICE. I.e, you make money if you buy in before the good news period.

That’s all well and good, but when do these periods occur? Our next piece focuses on the tight relation of BAL intraday movements with external market factors (good old macro analysis) that have aligned with (and contributed to) their epic profits and supply agreements. For you mathematicians out there, we’ll also delve into the autocorrelation of BAL daily ranged movements and the implications of this in light of the market information we have.

That’s all for today, email cam@bluelakeinvest.co if you have a suggested area of focus for a future post. Otherwise I’ll continue getting worked up over BAL (for now).